If there's one area of work comp pharmacy management that's making payers crazy, it's physician dispensing (followed closely by compounding).

The number of physicians and clinics dispensing drugs is growing; as one state seeks to reel in abusive practices, the purveyors move to the next. I first examined the business four years ago and found 18 companies in the business; a recent search turned up over fifty (I stopped counting there). This despite California's belated move to rein in the practice that had, at one time, accounted for over half of the work comp drug costs in the 'Golden State' (an appelation likely invented by dispensing firms...)

The problem lies not in the actual practice, but in the opportunity for abuse - an opportunity that far too many 'entrepreneurs' have grabbed onto with both hands. (Details on this, and specifically the high cost of drugs in Florida, are provided below)

That's not to say all clinics and practices dispensing drugs are unethical - some bill appropriately, charging perhaps slightly more than usual but nothing outrageous. That's OK, as handing the patient their meds on the way out fo the office can help increase compliance and reduce patient hassles.

Unfortunately, those good actors are the exception rather than the rule. The Investigative Reporting staff here at Managed Care Matters recently uncovered some rather alarming information about one physician dispensing firm - Automated Healthcare Solutions.

Automated Healthcare Solutions, located in south Florida, has one of the slicker websites, full of platitudes about improving patient care, ensuring access, improving outcomes, reducing payers' administrative workload...

Sounds great. Before you sign up, you may want to do a quick check on the folks behind AHCS.

Let's start with Paul Zimmerman, M.D. 'practicing orthopedic surgeon' and CEO of AHCS.

Impressive bio - including claims that he was formerly Medical Director at "Liberty Mutual, The Home Depot, Pan American Airlines, Baxter Healthcare and Sears". Knowledgeable sources have informed me that Zimmerman was never a 'Medical Director' at Liberty Mutual. And there's no evidence he filled that role at the Home Depot either. I've asked AHCS to provide substantiation for Zimmerman's claims...no response yet...

There's much more to the Zimmerman bio, information that for some reason the good doctor hasn't included on the AHCS site.

We'll leave aside his rather modest rating on healthgrades, as the sample size is so small as to be unreliable.

There are two other issues that may provide insight into Dr Z's policies and practices.

Allegedly, some years ago Zimmerman decided to go into practice in South Florida. He was taken under the wing of the late Dr Richard Dolsey, one of the best occ med physicians I've ever come across. Dr Dolsey ran an excellent practice (Physicians' Health Centers in Miami), dealt ethically and honorably with patients and payers alike, and was widely respected in the physician community. In the course of their association, Zimmerman practiced at Dolsey's clinic, at least until he allegedly decided to open his own office. According to sources knowledgeable about the events, Zimmerman was accused of attempting to interfere in Dolsey's practice, specifically by taking patients, clients, and staff from Dolsey to help Dr Z's new practice hit the ground running.

Instead, Dr Dolsey found out about Dr Z's plans, and right about the time Zimmerman was about to execute his plan, confronted him. According to sources, the confrontation allegedly involved Zimmerman being escorted out of the office in restraints.

Dolsey subsequently sued Dr. Zimmerman and won his case.

More recently, Zimmerman's decided to become heavily involved in Florida's political scene, contributing heavily to GOP candidates and campaigns. Among the candidates Dr Z has supported is Charlie Crist, the ex-GOP and current independent candidate for Senate. In fact, the Zimmermans have maxed out their individual contributions to Crist - who happens to be the current governor.

The dollars didn't stop there - at a measly $9600. Zimmerman's company, AHCS, also plopped down a check for $100 grand on the desk of the Florida First Committee, Inc., a Florida PAC controlled by GOP veteran Bill McCollum.

Loyal readers may recall Crist vetoed a bill that would have tightly limited reimbursement for physician-dispensed drugs, a veto that came out of nowhere, surprising many who thought it was a done deal as it would have helped rein in costs in the Sunshine State, where drug costs are 38% higher than other states reviewed by WCRI.

Yep, Crist vetoed a bill that directly, materially, and significantly helped Zimmerman and AHCS. A bill that, had it become law, would have significantly hurt Zimmerman.

What's the net?

What do you think?

Florida's drug cost problem
Florida's drug costs were recently analyzed by WCRI, which reported:

"...the average payment per claim for prescription drugs in Florida's workers' compensation system was $565--38 percent higher than the median of the study states.

The main reason for the higher prescription costs in Florida was that some physicians wrote prescriptions and dispensed the prescribed medications directly to their patients. [emphasis added] When physicians dispensed prescription drugs, they often were paid much more than pharmacies for the same prescription.

The WCRI study, Prescription Benchmarks for Florida, found that some Florida physicians wrote prescriptions more often for certain drugs that were especially profitable. [emphasis added] For example, Carisoprodol (Soma®, a muscle relaxant) was prescribed for 11 percent of the Florida injured workers with prescriptions, compared to 2 to 4 percent in most other study states.

Financial incentives may help explain more frequent prescription of the drug, as the study suggested. The price per pill paid to Florida physician dispensers for Carisoprodol was 4 times higher than if the same prescription was filled at pharmacies in the state. [emphasis added]

The study reported that the average number of prescriptions per claim in Florida was 17 percent higher than in the median state. [emphasis added] Similar results can be seen in the average number of pills per claim.".

Posted by at 11:49 AM | Permalink | Comments (1)

There's been a lot going on in New York's work comp system; heated discussions over adoption of disability and medical treatment guidelines, an uproar over assessments for self insured groups, and ongoing actions and attempted actions regarding the pharmacy fee schedule have kept our attention focused on the Empire State for lo, these many months.

Now comes news that New York may be the first state to dramatically increase payment for cognitive services. I heard this from WorkCompCentral's Mike Whitely, who informed me that New York Work Comp Board Chair Bob Beloton is looking to raise reimbursement for physician evaluation and management codes by 30%.

Mike will have much more on this tomorrow (read WCC to see); I'll focus my comments on the whys and wherefores.

First off, this is a good move, for many reasons. Fees haven't been increased for 14 years in New York, making it high time for a raise.

Second, if there's one service that is waaay under-valued in work comp, it is the time the treating physician spends with the injured worker, discussing the injury and treatment options, providing insights into medical care under work comp, educating the worker and their family about return to work, and discussing same with the employer and insurer. A 30% increase is money well spent.

Third, this will hopefully draw the attention of other states, and get them thinking about the significance of cognitive services.

All that said, I do have a major concern - as should you. About half of the care delivered to work comp claimants in NY is thru a discounted network. These networks may well try to keep their current discount arrangement, as a higher fee schedule will mean they deliver more 'savings' and thus earn higher fees (they get paid on a percentage of the 'savings', or the delta beween the fee schedule and contracted reimbursement amount).

It will be too bad if this (possible) increase doesn't result in actual increases in reimbursement, and instead just makes networks more profitable.

What does this mean for you?

Good news.

Posted by at 12:41 PM | Permalink | Comments (1)

Summer is ending next week, and favorable tax treatment will sunset not much later. With the end of vacation season fast approaching, investors will likely step up the pace, while owners looking to maximize their take-home are motivated to get deals done before 2011.

Another big motivator is the large amount of cash sitting idle as private equity firms have been waiting for things to settle down before risking their investors' funds.

Here's what's happening.

ISG Holdings announced this am that they have finalized their purchase of Bunch and Associates. The deal took forever to close, but now that ISG owns the managed care vendor look for Bunch to dump their Ingenix relationship and move to Stratacare (part of ISG's holdings).

Part of Bunch's attraction for ISG was the potential to move their bill review from Ingenix to Stratacare, a move that will increase margins by a couple million bucks. This won't be easy nor smooth, as Bunch has built a lot of logic in and around the PowerTrak bill review system, logic that has helped Bunch sell their services to self-insured employers. There are going to be some pointed conversations down in Lakeland (Florida, Bunch's home) as the new owners look to maximize margins while customers, and customer advocates, look to proceed with caution.

Earlier this summer, Odyssey Investment Partners' One Call Medical acquired transportation and translation company STOPS, broadening its workers comp portfolio. From a synergy perspective, this makes sense as injured workers often need transportation to their MRI appointment; as the largest MRI network in work comp, OCM should be able to leverage the relationship quickly.

Injured Workers Pharmacy has been looking for a buyer for some time, and the book is still out. IWP got hammered when NY changed their work comp pharmacy regs a couple years back, and has since moved into other states where they try to get claimant attorneys to get their clients to buy drugs thru IWP. Payers report IWP's costs are much higher than the same, or essentially identical drugs purchased thru PBMs' retail networks, making IWP persona non grata in the payer community.

PT firm Align Networks was rumored to be considering a sale this fall, but reportedly has decided to hold off for now.

There are a few more possible deals in the works, but we'll have to wait and see what develops. I'd expect at least two more transactions in the space before the end of the year, perhaps more.

Posted by at 9:54 AM | Permalink | Comments (1)

That's the question North Dakota prosecutor Cynthia Feland should be asked by Judge Bruce Romanick if and when she appears in front of him to discuss Sandy Blunt's request for a new trial.

The tortured history of Feland's prosecution of former North Dakota state fund CEO Sandy Blunt is entering a new phase, as Feland will shortly have to respond to a State inquiry into her conduct during the trial, conduct which may well have included a failure to provide the defense with exculpatory evidence.

This isn't a routine or common issue, despite what Feland says. In fact, it is quite rare for a prosecutor to be the subject of this type of inquiry, and once it gets to this stage, it is highly likely Feland will face disciplinary action by the State Supreme Court.

That's one repercussion for Feland.

Another may be equally harsh. As anyone who's watched any legal show on TV knows, the prosector must give all its evidence to the defense. Otherwise the defense has no idea what it is being charged with. This is absolutely basic to the US legal system, a core principal that is fundamental to our system of justice.

Blunt's attorney has filed a request for a new trial or dismissal of Blunt's conviction on charges brought against him by Feland. As I've discussed here repeatedly, the fact that these charges led to a court case in and of itself is incredible; Blunt's felony conviction for authorizing gift cards, trinkets, and food for employee meetings and refusing to require a terminated worker to repay moving expense is beyond comprehension.

Nonetheless, that's what happened. So here's what's new.

According to the article in the Grand Forks Herald, "Prosecutors did not turn over copies of a Bureau of Criminal Investigation agent's interviews with four Workforce Safety and Insurance executives and a state auditor, Blunt attorney Mike Hoffman said in a court filing. Hoffman said he had requested copies of all law enforcement interviews in the case...

Prosecutors also said Blunt allowed a senior WSI executive, Dave Spencer, to keep almost $8,000 in moving expenses that he should have repaid, and to exhaust his sick leave when he was not ill, a benefit worth about $7,000.

Spencer's employment agreement said he would have to repay some of his moving expenses if he resigned within two years; he left WSI in September 2006 after working there for about 19 months.

Hoffman said a Bureau of Criminal Investigation interview with the auditor, Jason Wahl, that was not disclosed to him[emphasis added] quoted the auditor as saying Spencer's repayment of the money was a "nonissue" because Blunt forced Spencer out of his job. That would have undercut prosecutors' arguments that the money was an illegal benefit to Spencer, Hoffman said. (according to North Dakota state policy, "In the event of a voluntary resignation, you will be responsible to repay the relocation reimbursement according to the following schedule: Before 1 Year 100%, Between 1 and 2 Years 50%, After 2 Years 0%."; Spencer's termination was not voluntary, thus Wahl's memo proved there was no crime.)

Feland's argument that the prosecution file was open to Hoffman does not absolve prosecutors of their obligation to turn over relevant material to the defense, Hoffman contended.

"An 'open file' policy does not abrogate or dilute the requirement that prosecutors disclose evidence" that the defense requests, Hoffman said. [emphasis added]

Not even in North Dakota.

By the way, I asked Feland repeatedly if she had provided this information to Hoffman or Blunt; she never answered the question.

Now, she'll have to.

I can't wait.

Posted by at 10:12 AM | Permalink | Comments (0)

Yesterday I discussed the ongoing debate about potential changes to California's work comp fee schedule.

In case my position was too subtle, I've got grave reservations about using RBRVS (Medicare) as the basis for a work comp physician fee schedule. That said, it looks like RBRVS will replace the current methodology, but there's still a lot of tweaking to do before the move is finalized.

Today we'll dive into facility costs, which look to be rising rapidly in the Golden State, driven in part by a loophole in the regs that allow double billing for spinal implants, along with consolidation in the hospital market and the attendent market power. This power is allowing hospitals to get ever-higher pricing in their negotiations with work comp network providers, which, in turn, is reducing 'savings' delivered by those networks to payers.

Here's a quick review of the CA facility fee schedule and some of the nuances and effects thereof.

Inpatient

The Official Medical Fee Schedule (OMFS) for inpatient care is facility-specific, based on Medicare's MS-DRG methodology plus a 20% multiplier. Thus, WC pays about 20% more than Medicare for inpatient services. The idea behind MS-DRGs was sound - pay hospitals more accurately based on better coding of comorbidities and complications.

In reality, costs have escalated under MS-DRGs as hospitals have gotten better at coding, leading to payments almost 5% higher than projected under the previous DRG methodology.

According to a study published in July of last year by RAND, the spinal implant pass-through results in additional costs of at least $60 million to the system, and that estimate was based on Medicare's average payment for the devices. Anecdotally, it appears that many work comp payers are likely paying well above that level. Efforts are underway to address this issue, but in the meantime payers are paying much more than they should for these devices.

Additionally, it isn't too much of a leap to think that this over-payment may drive additional unnecessary utilization, as unscrupulous providers seek to maximize their revenues by performing as many procedures as possible.

Ambulatory surgery

This has been a bone of contention (sorry) for some time for WC payers in California. The regs actually peg reimbursement to hospital fees, at the same 120% of Medicare, resulting in reimbursement that many view as excessive. Quite excessive. Regulators are looking to revise the regs, and many expect reimbursement to decline as a result.

The revision process is happening as you read this; the latest proposal calls for adjusting the ambulatory surgical center fee schedule by reducing the multiplier for ambulatory surgical center facility fees to 100% of the Medicare outpatient fee schedule, plus a 2% reimbursement for high cost outlier cases. (here's the latest update.)

So, what's the net?

I'd argue, as many have, that the work comp facility fee schedule is too high. In some other states this wouldn't be too much of an issue, as most bills would be repriced to a network discount, negating the fee schedule problem (albeit not entirely).

Unfortunately for payers in California, hospitals' negotiating power has grown to the point where they can often dictate terms to large group health payers, who have much more bargaining power than work comp networks. In many instances, networks are negotiating deals with hospitals that are not much better than fee schedule

The result? Of late we're seeing payers' facility costs climb by double digits, with little relief in sight.

So what to do?

Rather than look for discounts, look at underlying costs. There are wide variations between and among facilities for the same services, and by comparing costs and outcomes, payers can identify facilities that, while they may not offer a 'discount' per se, offer a much lower price than a hospital that does promises a discount.

A good place to start is the Dartmouth Atlas where you can find cost and outcome data for specific hospitals.

Posted by at 6:53 AM | Permalink | Comments (0)

There's a lot going on in California's workers comp system - medical costs zooming up and driving premium increases along the way, narcotic usage skyrocketing, a dramatic increase in scripts for medical foods and compounds, judges upholding controversial decisions, and momentous decisions re changes to the fee schedule. Add the continued news about rising hospital costs, and you've got more than enough activity to keep anyone busy.

We can't cover all the issues here, so a summary will have to suffice - promise to dig deeper into a few later this week and into next.

First, the controversy over changing the workers comp fee schedule.

California does not currently use Medicare's RBRVS methodology as the basis for its non-facility fee schedule, making CA the only fee schedule state to not use RBRVS.(the other states that don't use UCR, and I'd argue they really don't have 'fee schedules' in the true sense of the term). The state has been considering moving from its current methodology the Official Medical Fee Schedule, or OMFS) to RBRVS for several years, with considerable progress over the last couple of months.

Most recently, public hearings were held in Sacramento with various stakeholders asked to respond to the latest revisions to the suggested fee schedule, revisions that added an additional $52 million in projected physician payments. I'll spare the details on the methodological discussions, which have to do with changing teh conversion factor, one of the components of the RBRVS pricing methodology. (workcompcentral.com posted on this August 18). The basic argument advanced by providers is, well, pretty basic - if you reduce reimbursement, there may well be an access problem as providers opt out of workers comp.

According to workcompcentral.com;

"Destie Overpeck, the DWC's chief counsel, said she was encouraged that most of the providers in the audience seemed to support the division's multiple conversion factor plan, or at least understood it was needed to smooth the transition to a new system.

Primary care physicians, occupational therapists and providers who bill under the "all other" category would generally see an increase in payments, Overpeck said. "They seem to be saying, 'Hey, we understand it's not as high as we want or would get with a single conversion factor, but if you lower the rate on surgeons too much they won't be there anymore," she said."

There is some evidence that lower work comp reimbursement does impact provider participation. When Florida increased reimbursement over a decade ago, anecdotal reports indicated more surgeons started accepting work comp patients. A pretty solid research effort (albeit one specific to neurologists) presented at the meeting showed a strong correlation between reimbursement rates (as a percentage of RBRVS) and provider participation rates; according to the study, "G{eneral] M[edical] fee levels provide the highest correlation (90.7%) with neurologist willingness to accept workers’' compensation patients."

The study also noted "a modified RBRVS medical fee schedule set at 156% of Medicare for EM fees and 121% for all other fees (an often-discussed plan) would result in a neurologist WC participation rate of 12.0%, third lowest in the U.S."
(A METHODOLOGY FOR PREDICTING PROVIDER PARTICIPATION IN WORKERS’' COMPENSATION MEDICAL FEE SCHEDULES
STEVEN E. LEVINE, M.D., PH.D. AND RONALD N. KENT, M.D.)

Perhaps the key point was best made by Kent Spafford, CEO of OneCall Medical, the leading work comp imaging company. Spafford noted: "The California Workers' Compensation Fee Schedule is designed to provide adequate compensation to providers, so they are willing to provide care to injured workers. It is not the vehicle to control costs. Any action relative to the fee schedule should be designed to induce current and future providers into the system and not disenfranchise the existing providers."

Recognizing OneCall's is keenly interested in the fee schedule as it bears directly on the company's ability to profitably operate in the state, Spafford's comments are nonetheless well worth consideration. Without reasonable access to care, disability durations may well increase, the quality of care decline, and system costs continue their current upward trend. Notably, access under the current OMFS is pretty good, with 90% of patients reporting 'good access to quality care'; the access problems that did occur weren't related to cost but to administrative hassles, language issues and UR delays. As access is good under the current system, one has to consider the possible benefits of reduced prices - for some providers and some services in light of possible decreased access.

Moreover, as I've discussed here on numerous occasions, price per service is but one of, and certainly not the most important, contributor to total cost. As we've seen with California's revised drug fee schedule, cutting price often doesn't reduce cost - in fact, total drug costs in CA went up - way up - after the fee schedule was slashed.

I'll draw a distinction between physicians and hospitals; as I'll discuss tomorrow, California's hospital costs are high and trending higher, with no likely end in sight.

California's Division of Workers Comp is working diligently to balance the cost:access equation. I'd suggest that a careful and thorough assessment of hospital costs may well indicate there are lots of dollars to be saved, dollars that won't compromise access.

Posted by at 7:35 AM | Permalink | Comments (1)

In the course of my consulting practice, I see a lot of work comp medical bill review 'savings' reports. Over the last fourteen years (since founding Health Strategy Associates in 1996) I've collected, reviewed, and analyzed scores of savings reports from pretty much every vendor in the business - as well as many of the larger TPAs and insurers.

There's some consistency in the business, but not near enough. That alone makes it hard to compare one vendor to another, much less benchmark one company's performance against the industry.

Leaving that aside, there are a number of issues with most reports, issues that clients/insureds/policyholders would do well to consider when evaluating performance or comparing potential vendors.

1. Does the savings report include reductions below state fee schedule (SFS) and/or Usual Customary and Reasonable (UCR)? Many vendors don't split out savings below SFS/UCR, instead lumping all reductions into one 'overall' category. This is either a) an oversight as any vendor should be willing and able to demonstrate their ability to reprice bills to comply with regulations, or b) a way to inflate savings so the naive buyer sees a bit percentage reduction and thinks the vendor's doing a crackerjack job.

2. Does the savings report clearly identify the source of UCR data? There are several vendors out there that provide these data, and knowing which is important in evaluating performance.

3. How are savings percentages calculated? Do they include savings for duplicate bills or duplicate line items (they shouldn't). Do they include all types of care, such as pharmacy and imaging? In many instances these services are outsourced to specialists, requiring the customer to combine results to get an overall figure.

4. For pharmacy, savings should be reported using AWP as the benchmark - if the vendor wants to include SFS, that's fine, but AWP (and make sure they define the source) is the universal standard.

5. How is network penetration calculated? Is the basis the number of bills or dollars? Dollars are preferred, but may skew the numbers higher than number of bills, as network penetration tends to be higher for facilities (which have higher average bill charges).

6. Over time, have you seen a decrease in fee schedule reductions and an increase in so-called 'nurse review' or 'bill audit' or 'professional review' savings? Hint - if these are billed separately, there's often an inherent motivation on the part of the vendor to lowball SFS reductions in favor of these 'other' reductions.

7. Semantics and definitions. Make sure there's a clear and complete understanding of each and every term, including such seemingly-obvious ones as 'bill' - can be a 'staple', a single page, a date of service, or 'up to x lines'.

What does this mean to you?

After all, you're the customer.

Posted by at 8:52 AM | Permalink | Comments (1)

It's hard to overstate the importance of the claims IT system in workers comp.

Systems directly, and materially, affect: productivity; compliance; claimant and policyholder satisfaction; medical costs; litigation rates, expenses, and outcomes; administrative expense (both unallocated and allocated); claims cost; employee retention and satisfaction; and ultimately growth, revenues, and profitability.

To date there hasn't been a comprehensive survey of claims systems providing insights and data on features, trends, user satisfaction, key attributes, cost, flexibility, connectivity, issues and problems.

That's about to change.

Next month Health Strategy Associates will conduct the First Annual Survey of Workers Comp Claims Systems, gathering input from all stakeholders including IT executives, claims executives, managers, and desk adjusters. The results of the survey will be available early in the fourth quarter, with an executive summary available at no cost to interested parties.

Management responses will be gathered in a structured telephonic interview format, while an online survey instrument will be used to gather responses from desk-level experts. Input from the two groups will be compared and contrasted, and we're betting there are areas where the folks 'on the front lines' see things a bit differently than the people 'in the management suite'.

Sandy Blunt, former COO of the Ohio state workers comp fund and former CEO of the North Dakota state fund, is running the project, and we couldn't have a better leader. Sandy's been intimately involved identifying requirements, selecting systems, comparing vendors, assessing performance, and designing workflows. His leadership will ensure the Survey is as practical as it is timely.

If you are interested in participating in the survey, send an email to Sandy at SBluntAThealthstrategyassocDOTcom.

Participants will receive a detailed version of the Survey Report.

We anticipate this will become an annual Survey, one of the series of Surveys conducted by Health Strategy Associates as we continue to help work comp payers, providers, and stakeholders make more informed decisions.

Posted by at 7:54 AM | Permalink | Comments (0)

The good folks at CWCI just published a research report (The Cost and Utilization of Compound Drugs, Convenience Packs and Medical Foods in California WC) documenting the rise in spend on medical foods, repackaged drugs, and compound drugs from 2006 - 2009; the highlight is these categories accounted for almost 12% of drug spend in California in Q1 2009.

A couple of the findings that jumped out at me...

- the average amount paid per compound drug as $728 in Q1 2009.

- medical food reimbursement hit $233 per script that quarter

- a new category, 'co-packs' has emerged as a significant therapy; these are combinations of drugs with medical foods dispensed as a single unit.

The story of drug costs and attempts to address same in California is fascinating, with lessons aplenty for regulators and payers.

- A drastic reduction in the fee schedule was followed by explosive growth in repackaged drugs.

- Regulatory changes finally addressed that issue, but meanwhile the use of narcotic opioids increased six-fold, likely negatively impacting disability duration as well as increasing cost.

- New entrants into the therapeutic armamentarium, entrants that are foreign to many adjusters, case managers, and work comp execs alike, are growing in importance, requiring regulators and payers alike to understand their impact and develop policies for coverage and reimbursement.

The list of medical foods includes Theramine, Gabadone, Sentra, Apptrim, Trepadone, and others, with Theramine (pain) and Sentra (sleep aid) accounting for over half of the volume in California. Medical foods are pretty new to me; according to the Orphan Drug Act (1988 Amendment), a medical food is "a food which is formulated to be consumed or administered enterally (orally) under the supervision of a physician, and which is intended for specific dietary management of a disease or condition for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation."

I'm no pharmacist or clinician, and am certainly not able to comment on the efficacy of medical foods or specific medications. For a primer on medical foods, click here.

There does appear to be evidence supporting the use of medical foods for treatment of pain, osteoarthritis, and other conditions, with one medical food, Limbrel, the subject of large, double-blind, placebo-controlled clinical studies in the United States and Japan. According to one source, "Limbrel administration has resulted in statistically significant improvement in all primary clinical endpoints (functional mobility, functional stiffness and functional joint discomfort)."

What does this mean for you?

If your P&T Committee hasn't looked at medical foods yet, you may want to add it to the agenda for the next meeting. It is highly likely we're going to see more of these scripts, and far better to be ready than to have your adjusters making decisions completely unprepared.

Posted by at 6:36 AM | Permalink | Comments (0)

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 at 7:12 AM | Permalink | Comments (2)

California's Senate will be considering AB 2779 today, a bill that would (among other things) require Prior Authorization of compound medications for work comp claimants. While there's no question compound meds are a big issue, the bill would do nothing to solve the Golden State's larger problem - out of control drug utilization.

(thanks to WorkCompCentral for the heads up)

Here's the issue.

The work comp drug fee schedule in California is pegged to Medi-Cal, resulting in the lowest reimbursement for drugs in the nation (with the possible exception of WA).

Pharmacy Benefit Managers (PBMs) operate on the difference between what they pay the pharmacy and what their customers pay them. In California, that delta is tiny, if not negative. If PBMs don't have any operating margin, they can't afford to allocate clinical resources to deal with prior auth requirements; they'll lose even more money in an effort to help their clients. That's neither appropriate nor good for the long term health of the comp business in California.

To those who claim the low fee schedule hasn't caused any problems, I'd suggest a thorough read of CWCI's excellent discussion of the explosive growth of narcotic opioids among comp claimants. Here's the brief takeaway - California slashed the work comp pharmacy fee schedule just about in half six years ago. Since that time, the number of scripts per claimant has increased 25% and costs per claimant are up 31% (CWCI stats). And that's not the worst of it. Schedule II narcotics have gone from less than one percent of scripts to almost six percent, a six-fold increase.

But what does that have to do with a bill designed to attack one of the emerging cost drivers - compound meds? Isn't the proverbial half a loaf better than no loaf at all?

No. While the bill enables payers to deny compound meds for medical necessity (a relatively easy call, as I don't know of any evidence-based guidelines that recommend compounded medications, PBMs simply can't afford to develop the workflows, do the research, hire the clinical staff, and manage and monitor the intake/referral to the adjuster/approval-denial/appeal processes. This is a lot of work, requires careful planning and implementation, and must include clinical staffing - nurses, pharmacists, and in some cases perhaps physicians.

We've seen the impact of the low fee schedule on total costs - they've gone up. What we haven't seen is the impact on injured workers - many more are now on narcotic opioids, with some undoubtedly suffering from all the complications linked to these potentially debilitating and addictive drugs.

AB 2779 piles more work on top of an already overburdened industry, while doing nothing to address the underlying problem.

A major step in the right direction would be for California to de-link the comp fee schedule from Medicaid. That would give PBMs the pricing stability they need to help their clients regain control over drug costs.

For a detailed discussion of Medicaid's suitability for work comp drug pricing, click here.

Posted by at 9:06 AM | Permalink | Comments (1)

There's been a lot of 'under the radar' activity in the work comp space of late, with much of it coming from the Medicare Set Aside sector. As 'unique' as the workers comp services sector may be, there's no niche as...fascinating as the MSA business.

It is brutally competitive; rife with personal, public attacks; and abounding in claims, counter-claims, and counter-counter-claims. Here's a quick tour of some of the news.

Coventry sales chief Ken Loffredo will be leaving CVTY after over a decade to take an equity role at Med-Allocators. The departure isn't imminent, as he and Work Comp Division boss David Young are working together to find a successor, looking at both internal and external candidates.

Coventry isn't doing much in the MSA business these days, and reports indicate management probably wished it didn't do anything with MSAs in the past.

Gould and Lamb and (former CEO) John Williams have parted ways, reportedly because Mr Williams 'wants to spend more time with his family'; evidently G&L's owners are fully supportive of that desire. No announcement yet on a replacement.

The book on G&L has been out for some time; no word on whether the company is still looking for a sale or additional investment. The costs associated with preparing for CMS reporting, and challenges thereof, may be a factor

Despite some competitors' statements (public(!)) to the contrary, PMSI is not contemplating, thinking about, planning to, or even preliminarily exploring a sale of the company's MSA division. Don't know how that got started, but there's nothing to it

Those are just the highlights.

The rough-and-tumble MSA industry reminds me of the oil and gas business of a hundred years ago. So far no John D Rockefeller has made an appearance, but the industry is ripe for consolidation. Lots of folks are trying, but no one's looking like a clear leader.

Posted by at 7:18 AM | Permalink | Comments (1)

Data from several sources, including Farrah and Associates (got to love a company that is located in Maine) indicates group insurers were able to reduce medical trend to 4.9% last year. That's the best result, in, well, further back than I can remember.

Coventry's recent Q2 2010 earnings call indicated their results were comparable, and med loss trends were pretty close.

Aetna's numbers are comparable, as are the reasons for the improvement. According to a WSJ piece, "Aetna and its peers are reporting lower utilization of medical services this year. [President Mark] Bertolini attributed the trend to the weak economy, a less severe flu season, harsh weather in the first quarter and some wearing off of Cobra coverage for people who were laid off their jobs."

How'd they do it? Can you do what they did?

First, let's deconstruct the reasons for the happy news.

The flu season wasn't a) as bad as predicted and b) insurers, burned by the previous flu season, probably over-reserved.

Members covered by Cobra are notoriously expensive; people don't sign up for Cobra unless they think they'll need it, and in most cases they are right. Loss ratios for Cobra tend to be well above 125%; thus the expiration of Cobra helps dump unprofitable business. Expect this to continue to aid MLRs for several quarters to come.

Many health plans now have higher deductibles and copays, cost-sharing arrangements that may well be causing members to avoid seeking care. (research suggests the care avoided may be necessary or unnecessary). Coventry Allen Wise mentioned this in his earnings call as a possible contributor.

From a purely speculative perspective, it is possible that employers who were faced with high premiums due to poor experience rating, older populations, or other factors, have dropped their coverage at a higher rate than in the past. This might contribute to lower utilization. I'd also note that rate increases may have the opposite effect; employers that really need coverage will hold their noses and pay up, while employers who don't think it's worth it (read - don't expect to need insurance) drop out.

We're left with results driven by benefit design, demographic changes, and one-time events.

Don't get me wrong, the numbers are good, but the drivers aren't what we need to really gain control over costs over the long term.

Fortunately, some health plans are already taking steps to do just that with smaller, tighter networks and limited access out of network.

If you are a workers comp payer in California, chances are your results were a whole lot worse, as medical costs are once again back up to pre-reform levels. According to this piece in Risk and Insurance;

"...looking at first-year payments on lost time claims, researchers found that since hitting their post-reform lows, average amounts paid per claim for treatment have increased 41 percent; average amounts paid for pharmaceuticals and durable medical equipment are up 69 percent; [emphasis added] average amounts paid for med-legal reports are up 79 percent; and average amounts paid for medical cost containment are up 86 percent."

Of course, this simply means reform cut costs dramatically over the last few years, and only now, several years after reform's implementation, have costs returned to the levels seen in 2004.

That said, comp payers can't fiddle with benefit design, out of network contribution differentials, cost sharing, and the like.

What does this mean for you?

b) for comp payers, the recent moves to smaller networks should be a big wakeup call.

Posted by at 8:50 AM | Permalink | Comments (2)

Coventry earnings call this morning was notable in at least two ways - more discussion about underlying cost drivers, utilization trends and management thereof, and the growing importance of low cost delivery systems from management.

And more evidence that (most) financial analysts don't understand this business.

Here's my view on the takeaways from the call.

The per-share earnings charge of $1.18 (from work comp PPO litigation in Louisiana) was the subject of a good deal of discussion during Coventry's Q2 2010 earnings call this morning, but has to be considered in the context of the overall solid performance of the company.

Coventry actually increased guidance for the full year, marking another improvement in financials for the company that has been on a steady upward trend since CEO/Chair Allen Wise resumed his post a year and a half ago.

Commercial group membership grew nicely, while MLR (medical loss ratio) guidance decreased for the entire year. Coventry expects medical costs to increase in the second half of 2010, consistent with past experience.

In the prepared remarks part of the call, management diiscussed the implications of health reform, asserting the company's recent results show it is well prepared for reform as it is able to control MLR while maintaining membership and expanding the company's footprint in selected markets (the Mercy deal is an example)

The company's statement noted Wise's enthusiasm for results and performance of the company's clinical management programs.

Clarity around MLR regulations was the first question - unsurprisingly, given the new regulations regarding limits on insurers' administrative and other fees. Wise noted that the cost structure in one market in particular was going to improve by shrinking the company's network, selecting more cost effective delivery systems/health systems. This marked a significant change from calls as recently as last year at this time. Coventry is clearly seeking to partner with more cost efficient health systems; as Wise put it, 'we need to stop fighting over nickels and focus on overall costs'. [paraphrasing]

This was followed by a question about health plan utilization trends - overall utilization appears to have tapered off industry-wide, the question is why? Wise admitted Coventry doesn't know, although they've spent a lot of time looking at this and their preliminary conclusion is the high deductibles and copays are leading to lower utilization, coupled with expiring COBRA benefits for some employees laid off quite a while ago.

Going forward, Wise sees the market as getting more competitive, making customer service and managing the little things critical to survival and success.

Wise thinks the group health product pendulum has swung back to mid-eighties model where networks are smaller, there's less choice, and better control over cost and utilization. Coventry's going to offer products with smaller networks based on provider systems with documented better outcomes and lower costs. They will preferentially look to buy provider-owned plans as they tend to have better cost structures than non-provider-owned plans. The analyst who asked the question wasn't particularly interested in what Coventry was doing, but rather focused on pricing implications given the MLF regs coming out shortly.

That's another example of how most of the analysts following this business are out of their depth. The real issue, the key to success, for Coventry and every other health plan, is how they are going to compete in a post-reform world. Price is a result of cost structure, and the failure of the analysts to focus on cost and cost drivers shows how disconnected the analysts are.

Another analyst asked if other health plans are pursuing similar acquisition strategies. Wise noted that there just aren't that many potential acquisition targets that have good cost structures, fit geographically, and are provider-owned.

The company will be revamping its individual health product offering - in response to a question, Wise noted that the company's distribution, IT, and benefit design are all works in progress, and there's still a ways to go.

More to come after I review the transcript

Posted by at 9:27 AM | Permalink | Comments (1)

As I reported Saturday, the prosecutor who charged former North Dakota state fund CEO Sandy Blunt with felony 'theft of services' is herself under investigation for allegedly withholding exculpatory evidence from Blunt's defense attorney.

Cynthia Feland's case has been heard by the ND Supreme Court's Inquiry Board, who found enough evidence to convene a Disciplinary Board. From the ND Supreme Court website - "Formal proceedings are begun when there is probable cause to believe that misconduct has occurred that deserves a public reprimand, suspension, or disbarment." [emphasis added]

This isn't a routine, 'happens all the time' thing. Far from it. although to hear Feland tell it, this is no big deal - according to the Bismarck Tribute, Feland "said it is not uncommon for people to file complaints against prosecutors."

Well, Cynthia, let's look at the numbers, shall we?

Last year there were 349 cases that went thru the Disciplinary Board program.

192 were dismissed or the attorney was referred to an assistance program and 123 are still pending. That leaves 34 cases where there was some kind of final ruling. 17 went to a Panel Hearing. That's where Feland is headed. And the odds aren't good.

Only 2 cases were dismissed. Of the remaining cases, the Panel reprimanded the attorney in 6, the Supreme Court suspended the attorney in seven, and disbarred the offender in 2.

So Feland has a much better chance of being disciplined, or having her license to practice suspended, than she does of acquittal.

If she's not reprimanded or suspended, it's even odds if she's acquitted or disbarred.

And she has the temerity, the unmitigated gall, to pooh pooh this? A sitting prosecutor, looking at a hearing where she has just over a one-in-ten chance of escaping unscathed? And a 60% chance of losing her license, at least temporarily?

I find it hard to believe that the Inquiry Panel would find probable cause where none exists, particularly in a case where a sitting prosecutor is accused of withholding evidence from a defendant.

As a prosecutor, I'm sure Feland would love those kind of odds.

Interestingly, none of the other media outlets in the state picked this up; neither did the local AP writer (who happens to be a facebook friend of Feland's).

I'm vastly unimpressed with the media in NoDak; here's a case of potential wide-ranging import, one where a prosector is charged not only with withholding evidence, but also suborning perjury, yet it's not worthy of coverage.

Nope, not when the state fair parade's in town, by golly!

Posted by at 6:03 PM | Permalink

Last Friday the news couldn't have been much worse for ex North Dakota state work comp fund CEO Sandy Blunt: the state's Supreme Court affirmed his felony conviction on charges of theft. I spoke with Sandy that day, and can only report that he was all but devastated by the ruling.

What a difference a week makes. This morning, Sandy must have a whole different outlook - the prosecutor who convicted him is herself under investigation for allegedly suborning perjury and prosecutorial misconduct.

Late this week sources informed me that the state's bar association was about to begin a formal 'trial' of Cynthia Feland based on evidence she withheld information from Blunt and his defense attorney. While this isn't an actual criminal proceeding, it is quite serious, as the allegations, if upheld, are grave enough to result in Feland's disbarment for life.

As I reported months ago, "I contacted Feland several times over the last few weeks, asked her directly about this situation, and she refused to address the key question - had she provided Blunt with a copy of the State Auditor's memo which cleared Blunt of any malfeasance related to Spencer?..." You can read her response to my query, but here's the net - The prosecutor has no record of providing the defense with a document that would have allowed the defense to prove that the prosecution's main charge was not a crime.

While I couldn't force the issue, the state Bar Association, and the county sheriff, have.

The details are beginning to come out. This morning's Bismarck Tribune had a front-page, above-the-fold article detailing the allegations against Feland. Although Feland pooh-poohed the proceedings, according to the Tribune, "Sending a case to the Disciplinary Board for formal proceedings means "basically, they're making a finding that there's probable cause that misconduct occurred," [ND Supreme Court Clerk Penny] Miller said."

As assistant prosecutor, Feland personally led the state's prosecution of Blunt.

The evidence was brought to the attention of the ND Bar Association by Steve Cates, author of the North Dakota Beacon and one of Sandy's long time supporters. Case has diligently and persistently pursued the facts in this case for more than a year and a half, poring over thousands of pages of transcripts, reviewing each and every exhibit and scrap of evidence.

In the course of Cates' research it became apparent that Feland had failed to turn over exculpatory evidence, evidence that would have proven Blunt's contention that a state auditor had reported that most of the charges against him should never have been brought.

Not only did Feland withhold evidence, but she knew, before she brought the charges, that several of the charges weren't crimes. And even more seriously, Feland suborned perjury by getting a key prosecution witness, Jason Wahl, to lie on the stand.

Feland isn't the only prosecutor in hot water over their mishandling of the case. According to the Tribune, "The documents obtained by the Tribune said the Inquiry Committee West also found that Riha [Feland's boss] was issued an admonition for violating rules 5.1(a) and (b) of the Rules of Professional Conduct by not making sure that the attorneys in his office were conforming to the rules of professional conduct. The admonition also was issued against Riha for violating rule 3.8(d) of the Rules of Professional Conduct for his office not turning over a Nov. 8, 2007, memorandum from Jason M. Wahl in the state auditor's office to Feland."[emphasis added]

The Wahl memo indicated Blunt's actions regarding a discharged fund employee, actions that Feland had said were illegal, were perfectly legal.

Sources also indicate, and I have confirmed, that the county sheriff has launched a criminal inquiry into Feland based on alleged perjury charges. The charges stem from Feland's statement to the judge at Blunt's trial that all charges against Sandy had been sent to Blunt's defense counsel before trial. It now appears that Feland knew this wasn't true.

At long last, the truth is beginning to come out. Blunt was convicted, and his conviction upheld, due to prosecutorial misconduct. Simply put, he was railroaded by a prosecutor who accused him of crimes he didn't commit and lied to the judge during the trial.

Sandy can't get his life, or his reputation back. Here's hoping he makes the Burleigh County prosecutors pay for what they did to him, and make it abundantly clear that these criminal actions carry a very heavy penalty.

Posted by at 5:19 AM | Permalink

The good folks at NCCI just released a report [opens pdf] detailing workers comp medical cost drivers; there are two 'headline' findings; severity is increasing at a slower rate, and the price of medical services is becoming a larger contributor to overall cost increases.

(The studies are based on lost time claims closed within 24 months of accident, so an increase in the length of time claims are open or the number of claims open longer than 24 months won't show up.)

A quick side note than we'll discuss these and other findings. The study covers experience through 2006, thus changes over the last three plus years are not considered. As I've reported here and NCCI has covered in many papers, several components of medical have seen rather significant changes since 2006: pharmacy costs are up; facility costs are spiking; surgical expenses, driven in large part by implants have increased dramatically in several ares; physical medicine costs in several jurisdictions are down and imaging expenses appear under control, due in large part to the impact of networks.

The big news is the increase in utilization has tapered off; we haven't seen fewer medical services, but we also haven't seen continued growth in the number of services provided to claimants. I'd hasten to add that while this is good news, we're still dealing with too many services delivered to to many claimants.

The bleeding isn't getting worse, but it's still pretty bad.

The price issue is troubling. Most of the 21% increase in severity was due to higher prices for medical services, this at a time when the utilization of provider networks, offering discounted pricing for medical services, has grown significantly. PPO penetration, on a national average basis, is in the 60% range with wide variation among states - NJ and FL commonly see rates above 85%, while Texas and California are closer to 50%.

PPO penetration has increased significantly over time, yet prices have also grown. There are several potential explanations for this:

a) a change in utilization patterns over time, wherein more expensive procedures are used more often. This doesn't appear to be the case, as the NCCI study accounted for changes in service type.

b) an increase in fee schedules. again, this doesn't appear likely as most fee schedules have seen modest increases, with a couple notable exceptions.

c) increased provider pricing in UCR states. I'm thinking this has undoubtedly contributed to price increases. UCR pricing (usual, customary, and reasonable) are based on charges (not payments) for that procedure in that area in the preceding time period. Historically, UCR increases by double digits each year.

d) increased provider leverage in contracting. There's no doubt this has contributed to cost increases, as we've seen in California, Illinois, and many other states.

What does this mean for you?

You will want to assess how the prices you've been paying for specific procedures (and the number of procedures themselves) have changed over the past few years to see if NCCI's findings re price and utilization have continued since 2006.

Posted by at 6:49 AM | Permalink

There's a good bit of activity on the regulatory front as states with work comp pharmacy fee schedules consider possible changes to address the myriad issues inherent in AWP.

A little background will help frame the issue.

First, it's important to understand the fee schedule amount is only paid if the script doesn't go thru a PBM, and the vast majority of scripts do go thru a PBM, ensuring the carrier/employer/fund pays substantially less than the fee schedule.

My firm's survey of large payers indicates network penetration was 82% in 2008. Therefore, fewer than one in five scripts are paid at fee schedule.

Some think setting a fee schedule at Medicaid solves the problem neatly. Were it only that simple.

Let's look at California, which is the only state using Medicaid (known as Medi-Cal in CA). In point of fact, drug costs per claim are up 72% despite a fee schedule reduction that cut price more than 25%. Clearly, the lower fee schedule did NOT control cost.

I believe what has suffered is the clinical management of drugs; as evidenced by CWCI's recent report narcotic opioid usage is up 600% over the last few years. In addition, cost per claim is up dramatically - driven primarily by utilization.

Medicaid could be used as the basis for a reimbursement calculation, however Medicaid has several inherent problems.

First, it is a political football, subject to the political winds. This has caused significant problems in New York already, and has led regulators in California to prevent implementation of the lower MediCal reimbursement rates for work comp. As state budgets become increasingly constrained and as Medicaid greatly expands, we will undoubtedly see more states seek to reduce program costs by price reductions - simple, politically palatable, and score-able.

Second, Medicaid doesn't cover a some drugs used in comp, especially pain meds and drugs that are not on individual states' Medicaid formularies. As states seek cost reductions beyond those available from simple across-the-board fee cuts, they will move to tighter formularies covering far fewer medications, reference pricing, and other mechanisms that will effectively limit the drugs on the 'fee schedule'.

As a result, a Medicaid-based fee schedule would be the subject of ongoing lobbying activity and legislative/regulatory action as it requires constant 'maintenance'; legislators change reimbursement, drugs came on and off formulary, prices go up and down.

In terms of alternatives, WAC, AWP, and some of the other methodologies are inherently flawed. However there are other standards - standards such as Federal Supply Schedule, Average Manufacturers' Price that are not subject to the same flawed processes as AWP. Examining these may help stakeholders assess their usefulness as an alternative.

(for a synopsis of the various pricing metrics, click here.

What does this mean for you?

1. Fee schedules for drugs are not applicable to most drugs paid under workers comp as PBM rates apply.

2.States will move away from AWP; it will be important to understand the alternatives, their pros and cons.

Posted by at 10:07 AM | Permalink | Comments (1)

There's a bit of confusion in the comp pharmacy management space, as there appears to be contradictory evidence from two respected sources about the use of narcotic opioids in workers comp.

First, everyone agrees there's just far too many claimaints getting far too many far too potent narcotics. Perhaps not in those exact terms, but close enough. Heavy duty, potent, potentially addictive, divertable, high-street-value drugs are dispensed far too often in comp.

But there is a bit of disagreement about exactly what's going on.

First, CWCI, the always-authoritative California Workers Comp Institute, has been researching and reporting on this problem for several years, and their data shows the use of narcotic opioids is increasing. Dramatically.

In contrast, one of the largest work comp PBMs, PMSI, recently published their results which indicate a decline in usage of this type of drug early on in the claim cycle. I asked Maria Sciame, PharmD, PMSI's Director of Clinical Services what she thought might account for the decrease in the use of opioid analgesics in the acute phase of injury.

Here's her take (and I quote):

1. increased physician awareness of the potential negative effects of opioids

2. additional organized opioid monitoring strategies (mandatory reporting) associated with opioids may have reduced "off the cuff" opioid prescribing

3. increased awareness of pain management guidelines that call for non-opioids for the initial treatment of mild to moderate pain

4. decreased prescriber fear regarding the use of non-steroidal anti-inflammatory agents over the past year...remember the FDA warnings that have been issued within the past few years regarding the negative cardiovascular affects associated with NSAID use...started with Vioxx...physicians are becoming less cautious and have regained their comfort level with the use of NSAIDs again; thus, replacing narcotics for acute injuries with NSAIDS.

There are a couple other factors worth considering.

a) PMSI's business all flows thru a PBM, whereas CWCI's script data is from payers that use PBMs and some that don't (even in this day and age, some payers don't use PBMs; go figure). PBMs have clinical management programs in place to address things like early usage of narcotics.

b) CWCI's data isn't specific to early usage, whereas PMSI's is (in this instance)

c) CWCI is specific to California; PMSI's is national and as NCCI has reported, there are dramatic differences in prescribing patterns across states. NCCI's research also indicates narcotic usage across the country has stabilized somewhat of late after several years of consistent increases.

So, what does this mean for you?

If you aren't using a PBM, get with the program. If you are, find out if they are actively, assertively, and effectively managing narcotic opioid scripts and claimants on those scripts. If they aren't, find out why not (hint, it may be because you're not able to provide data or support their efforts, if that's not it, they've got some explaining to do)

Ask for data on narcotic usage for claims less than a year old, and older ones as well, and decide if your results are acceptable.

Posted by at 2:00 PM | Permalink | 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 at 8:08 AM | Permalink

In the work comp world there's an oft-used term used to describe medical costs - 'severity'.

I'm beginning to think that word itself is a problem, and perhaps is part of the reason the work comp payer community has proven itself, with few exceptions, unable to effectively manage medical expense.

There are any number of meanings for the term itself, but as it is used in the claim world 'severity' refers to the medical cost of a claim, or when used more broadly, medical costs overall (e.g. Severity of lost time claims increased in 2008 by xx%).

Severity is something that sort of just happens - a claim is either really severe or it isn't. Severity is driven by uncontrollable factors and thus we can only deal with the fallout, or results, or impact of severity.

Severity happens.

It does, but only if we let severity 'happen'. In reality, medical costs are much more controllable than many think; severity doesn't have to happen to you, unless you passively allow it to. But because we've grown accustomed to hearing things like "claims costs increased driven by a 9% increase in medical severity", we think 'oh well, there's that severity again, yawn..."

What we should be doing is asking a lot more 'why' and 'how' questions, and using the answers, or lack thereof, as the basis for actions to control severity:

- why is severity increasing?

- what specific areas and types of medical expenses are up?

- is there a region or state that appears to be up more than others?

- what are we not doing and why are our present programs not controlling cost?

- how do our results compare to our competitors? why? what are they doing differently?

Because the fact is, 'severity' is controllable - if you're willing to ask the hard questions and address some perhaps uncomfortable answers; able to concede that your programs aren't really 'best in class', and willing to adjust, retool, and revamp processes to drive better results.

In my experience most comp payers aren't willing to do what it takes to control severity. And that's why 'severity' controls them.

Posted by at 4:38 PM | Permalink | Comments (5)

Today's WorkCompCentral edition [sub req] reported on an emergency revision to Illinois' state workers comp fee schedule that will change the methodology for repricing surgical implant devices.

The move is a response to what the Illinois Workers Comp Commission described as 'price gouging'. In the announcement, [opens pdf] the state noted "some providers have inflated their reported charges for implants so high that the final reimbursement is as much as 33% over the average cost from other providers.

The previous rate was set at 65% of billed charges; the new reg sets reimbursement at 25% over manufacturer's net invoice price. The rationale for this? The "reimbursement rate is reasonable. It provides a significant profit margin while providing cost-containment and certainty for payers. In addition, in order to arrive at an accurate provider's cost, the Commission decided that the invoice price would be net of any rebates but also that actual and customary shipping costs for the implants additionally would be reimbursed."

What does this mean?

Well, using an invoice plus is better than a discount off billed charges, which has to be the most easily-gamed pricing methodology every conceived. Factoring in rebates is a good step as well; to my knowledge IL is the only state that considers the impact of rebates. And stating reimbursement is for the NET manufacturer's invoice price will help forestall gaming the invoice as well.

The challenge lies in determining what 'rebate' means, how it will be determined, reported, and factored into pricing, and how 'net' will be defined.

As I noted in a post a while back, The problem lies in the documentation of the paid amount. Most payers ask for a copy of the invoice, which, on the surface, makes sense - this is what was paid.

Not exactly. What the invoice doesn't show can include:

- volume purchase discounts

- rebates

- "3 for the price of 2" deals

- waste (some surgeons use the cage from one kit and screws from another, so the payer is paying for more hardward than is actually being used)

- internally developed invoices (documents prepared not by the supplier but by the provider)

This last point is the crux of the issue. Hospital systems often buy in bulk, with several implant kits shipped and billed; this obviously makes it impossible for the provider to produce the invoice for the device used in a specific surgery, as they never got one. Thus, many providers develop the invoice for a specific implant kit themselves.

There's another problem with implants - when they are defective, the patient has to go back in for more surgery. And the WC insurer has to pay. The only way to mitigate risk is to track the model and manufacturer for each implant - yes, it's work, and yes, it's work worth doing.

Finally, even the original invoice is for a device with a markup that is, well, huge. One analyst estimates gross margins are in the 80% range...driving profit margins that are the envy of any payer or health system.

The net? Kudos to IL for recognizing and addressing this issue. Now it will be up to payers to enforce the regulation, by demanding the actual invoice, not one developed in the basement. They may also want the provider's notarized statement that the invoice is the real, actual, honest-to-goodness true price net of rebates, discounts, etc.

Posted by at 7:37 AM | Permalink | Comments (3)

Coventry Health will be taking a $278 million charge against earnings to cover the company's fine plus interest and legal costs resulting from last week's Louisiana appellate courte ruling in a workers comp PPO network case.

On a per-share basis, the bill is $1.18 pre-tax.

the charge will be partially offset by improved earnings from other sectors, including Medicare Advantage Private-Fee-for-Service. According to Zacks, the "2010 EPS outlook was also revised to $1.57−$1.72 in view of the impact of the charge, down from the prior range of $2.35−$2.50 per share. Excluding the charge, Coventry anticipates the EPS outlook to increase by 40 cents per share to range between $2.75 and $2.90."

Since moving back into the executive suite over a year ago, CEO and Chairman Allen Wise has done an excellent job turning the company around - refocusing the company on its core businesses, shedding underperforming and inefficient operations and profit centers, even revamping the way the company negotiates provider contracts to focus on Medicaid, Medicare, group, and individual health businesses.

The quarter-billion dollar charge is undoubtedly the subject of much discussion at the company's, executive committee meetings as it will suck cash out of the coffers that would have been used to acquire more regional health plans and help Coventry prepare for the post-reform health insurance world. It is also notable as it comes from a division, workers comp, which heretofore had been a cash machine, generating significantly more profits than its rather modest top line would predict.

For now, Coventry appears to be weathering the storm, recently announcing the acquisition of a couple of regional health plans and predicting continued improvements in operating earnings.

Whether this continues may depend in some part on the outcome of the company's appeal of the LA case.

Posted by at 9:30 AM | Permalink

Yesterday's Louisiana appellate court ruling against Coventry's First Health work comp network is a major blow to comp insurers, employers, and networks in Louisiana, with potential impact in other states as well.

The ruling is here.

The court's finding supported a lower court's ruling affirming a state statute requiring PPOs to provide injured workers with PPO identity cards or give notice to providers 30 days before taking discounts. While Coventry will appeal to the state Supreme Court, the appellate court ruled against almost all of Coventry's arguments, making this an uphill battle for the nation's biggest work comp managed care firm. I'd also note that the decision itself takes Coventry's legal team to task for failings to accurately cite evidence in its written appeal, stating the "failure to provide record citations suggests that many of these assignments were interposed only for purposes of delay and confusion."

Ouch. (no pun intended)

While the finding may be bad enough, the size of the penalty is stunning - Coventry will have to pay $262 million - $2000 for each of the "131,024 instances in the past 10 years when it discounted providers' charges below the state workers' compensation fee schedule." (WorkCompCentral)

Some workers comp networks decided early on to avoid doing business at all in LA; MedRisk (HSA client) left the state after the initial ruling against Coventry along with several other PPO and specialty networks.

Implications

For Coventry, it doesn't look good. While I've taken the company to task in the past for what I perceive to be missteps, and some would argue that they should have pulled out long ago, it's hard to fault Coventry for believing they could conduct business in LA as they do in most other states, by contracting with providers to deliver discounted care to workers comp claimants. The additional notice requirements in Louisiana are unique to that state; in retrospect all networks should have picked up on this nuance, but in retrospect we all would have sold our stocks two months ago...

It doesn't look good for employers in Louisiana either. As MedRisk's General Counsel, Darrell Demoss noted in the WorkCompCentral piece, WCRI data suggests comp medical costs are significantly higher in Louisiana than in other states. Now that the ruling has been upheld, expect insurers and managed care organizations to avoid the state completely in fear that they too could be nailed by class-action suit.

On a national basis, this ruling will likely cause many network vendors and insurers to stop and very carefully review each state's laws and regulations pertaining to networks, with compliance staffs tasked with doubly ensuring their contracts comply with the letter and spirit of each jurisdiction's rules and regs. That's not a bad thing, as it's a heck of a lot cheaper to pay attorneys and compliance staff than a $262 million penalty.

What does this mean for you?

Except if you're a comp provider in LA.

Thanks to WorkCompCentral for the heads up.

Posted by at 10:17 AM | Permalink | Comments (3)

Anecdotal information indicates the comp injury rate is heading up just a bit. In email conversations with Jim Greenwood, CEO of Concentra, Inc., the nation's largest occ/urgent care clinic company, Jim sounded encouraged by the upward trend in the company's growth, particularly in an increase in patient visits.

Concentra is seeing its strongest growth "in the Great Lakes (Chicago, Michigan,
Indiana, Ohio and Western PA), followed closely by the Mid Atlantic / New Jersey / Philadelphia.

Texas is also doing well, but "activity levels in the southeast, far southwest and west coast [are] best described as moderate on a relative basis."

According to Greenwood, the growth in patient visits appears to be due to two primary factos: increased hiring in the transportation sector and greater market share for Concentra's clinics.

Department of Labor employment data doesn't necessarily correlate with Concentra's results. For example, Texas employment was up by 43,600 in May, and California saw 28,300 net new jobs that month; TX correlates with Concentra results but California doesn't. And, a spokesman for DoL noted: " the worst hit states remain the housing bubble states and manufacturing states around the Great Lakes...".

What does this mean for you?

If you're in the work comp services business, a little good news. Employment is clearly nowhere near where anyone would like it to be, but it is improving, if ever so slowly.

Posted by at 8:54 AM | Permalink

Yesterday the House passed legislation increasing Medicare physician reimbursement till November 30, when it is slated to drop by 23%. Then, barely a month later, physicians will see another cut which will cut their pay by another seven points.

The temporary fix will increase payments by just over two percent.

For six months.

Then the whole debacle/fiasco/mess will resurrect it's ugly head and we'll be right back where we are today, except the cost of an ultimate fix will then be close to $300 billion.

But that will happen after the fall elections, and well before the 2012 voting season starts.

On the workers comp side, several states will see their doc fee schedules change in step with Federal reimbursement, while the impact on most jurisdictions' fee schedules will play out over time as regulators and legislators work thru the politically-charged process, alter conversion factors and assess their potential impact on access and cost.

The indirect impact is likely to be much more significant as physicians and other providers billing CPT codes seeking to maximize reimbursement from private payers to offset (inflation adjusted) losses in revenue from the Feds.

For those interested in more detail, click here.

Posted by at 7:02 AM | Permalink

Newsday broke a story yesterday about a former Islip, NY parks workers who was busted for insurance fraud.

But this isn't your typical "out on TTD, moonlighting as a handyman" gig.

Nope, John Livingston, out of work due to a comp injury and according to his statements to his employer and adjuster, unable to find employment, was allegedly working as a bouncer at a bar.

A nude bar.

It seems that the $17 grand Livingston collected so far wasn't enough to sustain his lifestyle and other obligations, so a man's got to do, what a man's got to do. In this case, what Mr Livingston had to do was ensure patrons didn't get unruly or obstreperous. Let's think about this. Livingston, who was employed as an automotive equipment operator, told the Town he couldn't work in that job, yet he was able to find work tossing potentially beefy, probably inebriated guys out of a 'gentleman's' club.

Livingston's previous job must've been much more strenuous than your typical truck driving gig, or perhaps he couldn't sit for long hours, yet could, without too much pain or chance for injury exacerbation, latch onto struggling guys and launch them thru the back door.

Or maybe this was part of his therapy and work conditioning program.

Livingston pled not guilty.

The Empire State has gotten rather forceful about comp fraud, so I'd expect Mr Livingston will come to regret his alleged decision to mess with the system.

Hats off (no pun intended) to the adjuster or employer who ordered the investigation (if in fact this was the result of surveillance) and busted Mr Livingston.

Posted by at 6:03 AM | Permalink | Comments (2)

Yesterday's post about Mass General's mishandling (to be kind) of a woman's procedure and reimbursement thereof elicited a thoughtful email from the former CEO of a major work comp insurer.

Here's what he said (identifying details removed to protect the source).

I got in trouble early on with (the payer's) UR staff and attorneys because (after giving them multiple direct orders to clean up pre-auth letters) I began directing them to pay for procedures they approved but later wanted to deny. They would simply say that the procedure was appropriate for the injury but NEVER check the claim to see if it was part of the approved injury. For instance, they would approve a shoulder surgery as medically appropriate but the injury was for a knee. Had they checked the claim they would have seen the shoulder was not covered. Regardless, the UR folks approved it in pre-auth and the surgery was done.

Only afterwards, when the bill came in and the claims rep denied it did UR look at the claim more closely and support the adjuster. UR's excuse was that in very small lettering at the bottom of the page it said that we (the payer) may not be liable if blah blah blah. I told them that was execrable and to clean up the process and language. For too long, the UR department did not and so I made them pay the claims and docked them in their evaluations.

If the doc and the patient did everything they were supposed to and got an OK in writing I felt it was the carrier's ethical and moral responsibility to pay regardless of what the lawyers said.

Hear hear.

I'm of the opinion that this happens more frequently than one might surmise, but these types of determinations are kept quiet so as to not motivate more requests for treatment on non-covered body parts/conditions.

I'd also surmise that many non-approved treatments get paid due to the lack of an automated electronic connection between UR and bill review/claims. This is also an ethical issue of high importance, as it is a failure to act as a responsible fiduciary.

What does this mean for you?

How does your company handle these issues, and how do you feel about that?

Posted by at 10:00 AM | Permalink | Comments (7)

Broadspire, one of the largest TPAs in the country, has announced a new network strategy which goes by the acronym BOLD, that is notable as much for what's missing than what's present.

There's no mention of Coventry in the list of Broadspire's network partners.

I've discussed this at length with Danielle Lisenby, Broadspire's top managed care exec, and the company's president, Ken Martino. Danielle, Ken, Medical Director Jake Lazarovic, MD have led the company's efforts to develop and implement a medical management strategy based on "a better answer than the same old broad based discount network " approach.

Martino sees the BOLD network as a differentiator for Broadspire, a unique solution that is clearly different from those offered by the company's competitors. Martino also noted that the extensive analysis conducted by Broadspire confirmed their belief that "greater savings could be obtained using multiple partners than relying primarily on one network."

I've seen the analysis, and the numbers support the company's assertion. When examining network penetration and net savings percentage, the new strategy provides better results in all but three states, and in those the difference is minimal.

On the flip side, the net increase (penetration x savings) in many states increases by mid-single digits, with a couple well over ten percent.

Sources outside Broadspire indicate Coventry is none too happy with Broadspire's decision. According to Coventry reps (albeit second hand), Broadspire wasn't willing to 'partner' with Coventry. I'll leave it to readers to puzzle out how exactly Coventry defined 'partner'.

What does this mean for you?

Coventry dominates the work comp PPO business. They are, far and away, the leader in market share, and use that position to their advantage. Since the exclusive marketing deal with Aetna was inked a couple years ago, Coventry has been raising network access prices and strongly encouraging customers to utilize their network in most, if not all, jurisdictions.

From a business strategy, this makes a lot of sense - from Coventry's perspective. Using market clout to drive higher margins and hold off competitors is just good business - for the market leader. Over the near term, this has paid dividends for the work comp division's parent, as the network operation has generated significant cash flow.

I'd highlight 'over the near term'. Over the longer term, Coventry's approach is bound to alienate payers looking for more flexibility, more control over their medical spend. As it is, payers utilizing the 'one network' approach are ceding a significant amount of control over the largest part of the claims dollar to an entity that makes money on medical bills - the more bills that are generated, the more money they make.

Even a non-actuary like myself can see the problem - for the payer - with that business model. Now Broadspire has become the first large payer to break away entirely from the Coventry model. Their numbers are compelling; it will be interesting indeed to watch how self-insured employers react.

Note - there are several other large payers also looking deeply into new medical management strategies. Perhaps Broadspire's move will push these efforts along.

Posted by at 8:48 AM | Permalink | Comments (3)

I attended a meeting of work comp insurance execs in DC yesterday that addressed, among other topics, the dynamic situation in Texas, fee schedules for drugs, pending Federal legislation and the potential impact on comp, and the Gulf oil spill and its potential ramifications for Jones Act and Longshore/Harbor workers coverages.

While there wasn't a common theme (beyond the obvious) at the outset, by the end of the morning I was struck (as were several others in attendance) by the unintended consequences of past actions, and potential adverse consequences of future legislation and regulation.

As an example.

California slashed the work comp pharmacy fee schedule just about in half six years ago. Since that time, the number of scripts per claimant has increased 25% and costs per claimant are up 31% (CWCI stats). And that's not the worst of it. Schedule II narcotics have gone from less than one percent of scripts to almost six percent, a six-fold increase.

Why? How could costs go up if the fee schedule cut prices so deeply?

Simple. Some bad actors figured out how to game the system by repacking drugs and inventing their own prices, prices that were several times higher than they should have been. OK, that was fixed, albeit several years, and several hundred million dollars, later.

But there's another problem, one highlighted by the huge growth in narcotic dispensing - PBMs could not afford to effectively manage the drugs dispensed to claimants.

PBMs make their margin on the delta between what payers pay the PBM for scripts and what the PBM pays the pharmacy. When that delta is negative, as it is in California, there isn't any money to pay for data mining to identify potentially problematic prescribers; pharmacies that have low generic fill rates; claimants taking multiple narcotics and/or other meds that may conflict with those narcotics. And if they can identify the issues, they can't pay pharmacists and physicians to review medical records, contact the treating physician, discuss the issues, and resolve any disagreement.

Sure, PBMs and payers could decide to operate on a cost-plus basis, but there are business reasons payers prefer bundled pricing - its easier to assign it to a file, simpler to administer, and easier to report to clients and regulators.

That's not to say all PBMs don't try to clinically manage claimants' drugs - many do, and do a pretty good job given their severely limited resources. The payers that operate in multiple jurisdictions know that the PBM's fees in other states subsidize their California drug spend...and as long as California is the only state with a catastrophically low pharmacy fee schedule, that's OK (unless you're a California only payer, in which case good luck finding a PBM that will handle your pharmacy at fee schedule). But if other states decide to use a similarly low fee schedule, the wheels fall off the system.

This is but one example of unintended consequence of a seemingly obvious and easy way to reduce comp costs - costs actually increased dramatically, and I'd argue that length of disability did as well for those claimants on narcotics that otherwise would not have been.

The pending sunset of pharmacy networks in Texas is another example; due to the wording of Texas' comp reform legislation (as interpreted by the decision makers in Texas), PBMs can't operate in the state after 12/31/2010. There's a good bit of activity in Austin as various entities attempt to resolve this situation before the end of the year, and there's some hope those efforts will be successful. That said, there's no question a lot of work is being done by a lot of people who are tasked with cleaning up the 'unintended consequence' of unfortunately-worded legislation.

What does this mean for you?

As some smart person said years ago, "What makes you think you'll have time to fix it if you don't have the time to do it right to begin with". Lest readers construe this as a 'blame the regulator/legislator' rant - it isn't. Rather, stakeholders must engage with the people tasked with addressing these issues - before the laws are passed and regulations written. And yes, regulators and legislators would be well served to listen to those who live these issues every day.

Posted by at 10:02 AM | Permalink | Comments (1)

The evidence is pretty clear - low fee schedules don't have much, if any, impact on drug costs. Sure, they give the appearance of action, and some actuaries and politicians are able to claim future cost reductions based solely on slashing drug fee schedules from some multiple of AWP to some fraction of AWP, or perhaps even a state's Medicaid rate. But the data - whether from NCCI, CWCI, or my own firm's surveys, suggest that the price per pill (with some notable exceptions) is much less important in the scheme of things than how many and what type of pills are dispensed to claimants.

Exhibit One is CWCI's recent analysis of drug costs post implementation of MediCal as the basis for the work comp fee schedule. Alex Swedlow (one of the best and brightest analysts in the business) and John Ireland's analysis found "significant post-reform growth in both the average number of prescriptions and the average payments per claim for prescription medications. Between calendar years 2005 and 2007, the number of prescriptions per claim in the first year following a work injury increased 25 percent, while first-year pharmaceutical payments per claim increased 36 percent." [emphasis added]

Yes, after slashing the fee schedule from AWP+40% for generics and AWP+10% for brand (plus dispensing fees) to something closer to AWP-50% Generic /AWP-20% Brand, drug costs per claim went up. A lot. But that's not the worst of it.

The biggest percentage gainer? Schedule II narcotics - the heavy-duty stuff, associated with significant risk of addiction and abuse - went from less than one percent of scripts to almost six percent - a 600% jump in three years.

Why? One theory, which I've tested in conversations with several clinical pharmacists, is the drastic decrease in reimbursement in the Golden State left PBMs with no funds to do any real Drug Utilization Review (DUR), and even less to intervene on potentially high-cost, high-impact claims. PBMs make their money on the delta between what they charge the payer and what the retail pharmacy charges them; in almost all cases, PBMs' retail contracts call for reimbursement above the CA MediCal rate.

Tough to make that up on volume...

I'm meeting with interested folks in DC tomorrow to discuss this issue, and perhaps to think thru some potential alternatives to AWP, or God forbid, Medicaid as the basis for comp Rx fee schedules.

And as I prepare for the conversation, I'm thinking that a fee schedule based on Usual and Customary has some appeal.

U&C in pharmacy is the cash price for that drug on that day at that pharmacy; think $4 for the long list of generics pioneered by Walmart (which, by the way, is lower than what Walmart charges comp PBMs for the same drugs). Unlike other U&Cs, it is tougher to game, can be reported and collected electronically, and bears some relevance to market price - unlike AWP, which is known as 'Ain't What's Paid' as it doesn't factor in rebates, volume discounts, and other price-reducing mechanisms. True work comp drug geeks will know that 33 states currently use AWP as the basis for their fee schedules.

U&C isn't perfect - any time you base reimbursement on a rate that can be set by the payee, you open yourself up to abuse. But risk of abuse or gaming is likely pretty low - pharmacies see very few work comp scripts, and aren't likely to play games with their cash price customers just to make a few more bucks on a comp patient. And pharmacy chains do tend to alter pricing to respond to market demands, making U&C at least somewhat credible.

Perhaps best of all, U&C is going to be around for the long term - unlike the version of AWP that is most popular which will disappear within a year.

Posted by at 7:47 AM | Permalink | Comments (3)

I was talking at length with a good friend who works for a large payer last week, discussing the process of getting the organization to make significant, and very much needed, improvements to their managed care program.

This got me thinking - by no means is this situation unique to that one payer. If anything, resistance to change is a consistent thread throughout the workers comp payer/buyer/service industry. Pondering this over the weekend I came up with a few warning signs of and reasons for the resistance.

Warning signs

Statements such as "we've always done it that way", "that's our policy", or "that's how we handle X here" can indicate pride and consistency, traits that are often excuses for not thinking more and deeper about specific issues. Policies are good, as long as they're ruthlessly examined under a very bright light on a regular basis.

Long, exhaustive, exhausting studies and analyses and research into a new idea, especially those that involve a large committee of folks with lots of other, higher priorities. Committees are where good ideas go to die.

A culture of fear, where junior staff wait to hear what the boss says before chiming in; where criticism is pointed and personal, where people are afraid to speak up for fear of being criticized or chastised.

A resistance to comparison and measurement, where managers seek to report the data that demonstrates positive results (or at least results that help them achieve their bonus targets) and don't look for ways to compare their performance to competitors or the industry as a whole.

Why?

There is a cultural issue in comp, and perhaps in the larger property and casualty industry that has significant negative influence on the ability of companies to evolve and improve.

People who say 'no' succeed; risk-takers do not. Risk takers seek to write the somewhat questionable policies, try different approaches, ask 'why not' instead of 'why', look for creative solutions to old intractable problems, seek answers outside the industry instead of always relying on the time-tested. Sure, these risk-taking efforts aren't always, or even often, game-changing successes, but occasionally they do work brilliantly, and even when the improvement is incremental, it is improvement.

The 'no' people don't write the risks that fail to meet every criterion, stick to the book when 'managing' claims, don't direct injured workers in states that don't provide explicit authority, complain that the laws don't support tougher stances. They don't look for the 'how to', they complain about the 'why not'.

More specifically, there's a financial gravy train that drives TPAs and insurers that makes it difficult to try new approaches in managed care.

That gravy train is fueled by managed care fees, fees that in many cases are larger than the earnings from claims administration, and can represent a big chunk of an insurer's profit margin. Fees, whether from case management, utilization review, bill review, networks, or other services, contribute to the overall organization's financial results, making it tough to consider programs that might actually reduce the amount 'earned' by managed care programs.

Never mind that these new programs will also reduce medical costs. In fact, I can, and often have, made the argument that the current large generalist PPO reimbursed on a percentage-of-savings basis is actually driving up workers comp medical expenses, and the data I've seen bears that out.

Yet the vast majority of payers are still wedded to this old model.

What does this mean for you?

More evidence that change in the comp industry, however much it is needed, will be difficult and frustrating. Precisely because of that difficulty, those organizations that adapt and evolve will find themselves better positioned than their moribund competitors.

Posted by at 6:59 AM | Permalink | Comments (7)

According to Bill Kidd's piece [sub req] in WorkCompCentral this morning, several states are attempting to address the rapidly growing problem of surgical implant device fees via regulation or legislation - by basing reimbursement on the manufacturer's invoice. While it is great to see authorities paying attention to what has been a big problem for comp payers for several years, this solution may not be much of a...solution.

As I noted in a post a couple weeks ago;

"In several jurisdictions (including NY TX CA (working on a change) and FL) the basis for reimbursement is some version of the "documented paid amount" plus a handling fee of 10% or so up to a cap of a few hundred dollars (CA) or a percentage of the invoice amount (FL). Illinois is also contemplating a similar arrangement. [Bill notes that Minnesota is also looking into a fix]

The problem lies in the documentation of the paid amount. Most payers ask for a copy of the invoice, which, on the surface, makes sense - this is what was paid.

Not exactly. What the invoice doesn't show can include:

- volume purchase discounts

- rebates

- "3 for the price of 2" deals

- waste (some surgeons use the cage from one kit and screws from another, so the payer is paying for more hardward than is actually being used)

- internally developed invoices (documents prepared not by the supplier but by the provider)

This last point is the crux of the issue. Hospital systems often buy in bulk, with several implant kits shipped and billed; this obviously makes it impossible for the provider to produce the invoice for the device used in a specific surgery, as they never got one. Thus, many providers develop the invoice for a specific implant kit themselves."

So, what to do?

I don't see a legislatively-simple solution, or rather one that only requires a revision to existing fee schedule language. Requiring providers to disclose the 'price' is only practicable if they know what that 'price' is; as noted above, that often is difficult if not impossible to establish.

What states can do is require reimbursement at 'cost' plus something, allowing payers to work with specialty bill review vendors to determine what that 'cost' is. (HSA Client) FairPay Solutions provides this service; if there are others out there that can assist, let me know.

Posted by at 10:47 AM | Permalink | Comments (2)

Three items of interest from North Dakota - one quite positive, the others puzzling at best.

First, the good.

Sandy Blunt, former CEO of the NoDak work comp insurance fund, gave an excellent presentation on the current state of the work comp industry, with a strong focus on which claims are most important and most deserving of attention, and why they're also the ones often missed. (I've been privileged to work with Sandy on several projects, and the presentation is a great example of how much value he brings.)

If you missed it (over 600 attended the webinar), the recording is here and the slides here. (use FINEOS as password, all caps)

Now, onto the weird. And yes, both also involve Mr Blunt.

Regular readers will recall Sandy appealed his conviction (on ridiculous charges) to the North Dakota Supreme Court fifteen months ago, with oral arguments heard seven and a half months ago. As of yesterday, the Supreme Court had not yet seen fit to issue a ruling in the case.

One has to ask why. Dozens of cases that were filed and argued after Blunt's have been decided and those decisions released. The evidence is in, the arguments have been heard, there has been plenty of time for clerks to research precedents and judges to confer.

Yet no decision has been announced. Why not?

Even stranger, the prosecutor responsible for the conviction, Cynthia Feland, continues her electoral campaign for judge despite ratings from the North Dakota Bar Association that are lower than any other candidate. Perhaps the members of the Bar in NoDak are aware of some of Feland's...issues.

Members of the ND State Bar Association were asked to rank, on a scale of one to five, the qualifications of attorneys running in contested state judicial elections' professional competence, legal experience, judicial temperament, integrity and overall qualification.

Feland ranked lowest in every single category. Every one. And she was ranked lowest overall as well, with a 2.83 out of 5.00.

With the primary election scheduled for June 8 (a week from yesterday), Feland is hoping to be one of the top two vote-getters, a distinction that would put her into the general election in November.

Perhaps the Supreme Court is waiting on the results of the primary before announcing their decision. If that is the case, it is indeed unfortunate that politics would play any role in the judicial process.

If that isn't the reason for this close-to-record delay, than what is?

Posted by at 9:26 AM | Permalink

Mike Whitely of WorkCompCentral's article [sub req] on Florida Governor Charlie Crist's veto of the bill limiting reimbursement for physician-dispensed repackaged drugs illustrates just how confusing the weird world of work comp can be to the uninitiated - like Mr Crist.

For those unfamiliar with repackaged drugs, here's a quick primer.

First, recall drug costs in comp are driven more by utilization than by price, except in instances like this where price gouging is rampant.

Work comp drug fee schedules peg the amount paid for drugs to a multiple of AWP (except CA, which uses Medi-Cal); Florida's is set at 100% of AWP plus a $4.18 dispensing fee for both generics and brand drugs. (As I've noted previously, there are major issues with the use of AWP.) But AWP is based on the drug's NDC number, a code that can be created by the wholesaler. Thus, if a company wants to buy a million 800 mg ibuprofen tablets and repackage them into lots of 27, it can create it's own NDC, and thus set its own AWP.

CWCI (California) research showed that the repackaged drug ranitidine (generic Zantac) was priced at $255.56 for 150 mg. pills, compared to a retail pharmacy's cost of $25.90 and Drugstore.com's $19.71; the difference in markup on the ingredient cost between physician dispensing and pharmacy dispensing was about 1700%. Naproxyn (Aleve) markup averaged 1000%, Vicodin 750%.

Since California figured out how to prevent entrepreneurs making a fortune by repackaging drugs, the repackagers moved into other states. Florida is the current target; the latest Survey of Prescription Drug Management in Workers Comp indicated this is also a big problem in the upper midwest and southwest. Some states, including Texas and New York, specifically prohibit physician dispensing.

Florida's drug costs were recently analyzed by WCRI, which reported:

"...the average payment per claim for prescription drugs in Florida's workers' compensation system was $565--38 percent higher than the median of the study states.

The main reason for the higher prescription costs in Florida was that some physicians wrote prescriptions and dispensed the prescribed medications directly to their patients. [emphasis added] When physicians dispensed prescription drugs, they often were paid much more than pharmacies for the same prescription.

The WCRI study, Prescription Benchmarks for Florida, found that some Florida physicians wrote prescriptions more often for certain drugs that were especially profitable. For example, Carisoprodol (Soma®, a muscle relaxant) was prescribed for 11 percent of the Florida injured workers with prescriptions, compared to 2 to 4 percent in most other study states.

Financial incentives may help explain more frequent prescription of the drug, as the study suggested. The price per pill paid to Florida physician dispensers for Carisoprodol was 4 times higher than if the same prescription was filled at pharmacies in the state. [emphasis added]

The study reported that the average number of prescriptions per claim in Florida was 17 percent higher than in the median state. [emphasis added] Similar results can be seen in the average number of pills per claim."

Physician dispensing is not all bad; there's something to be said for ensuring the patient receives the right drug on the way out of the office, improving compliance and reducing the patient's hassle factor.

Crist, who is going to be running as an Independent for re-election this fall, may have bowed to pressure from lobbyists working for physicians and repackagers. He certainly wasn't trying to ingratiate himself with business; several larger employers were reportedly behind the measure.

So, what do you do about this?

Some payers are rewriting their provider contracts to specifically ban physician dispensing. Others are unilaterally cutting reimbursement to the 'non-repackaged' level. Another tactic is to notify contracted physicians that no new patients will be directed to them if they bill for repackaged drugs.

As Florida is an employer-direction state, payers have a lot of control and influence over physicians.

Use it.

Posted by at 6:38 AM | Permalink

As states take on the growing problem of surgical implant costs - the latest (and arguably greatest) effort by certain providers to reap huge profits from workers comp payers and employers, it's time to delve into the problem - and why a 'solution' isn't near as simple as we'd like.

First, how much are we talking here?

The current world-wide market for orthopedic implanted devices (a subset of the larger implant market) is in the $17 billion range, and growing at just under 10 percent a year. IN California alone, a RAND study indicated work comp payers alone are overpaying about $60 million a year for surgical implants. My guess is work comp payers are paying for a much greater percentage of implants than their overall 1.5% of the US health care market would indicate.

Spinal implants are a particularly popular item in comp - for details on this click here.

This isn't new news; back in 2008 I posted on what was then a rapidly-growing problem. It's taken till now for many payers to attempt to solve the problem, but their solutions are what I'd characterize as 'first-generation'.

Payer solutions to date have relied on two general approaches - basing reimbursement on the 'invoice' and/or a payer-specific database of historical reimbursement for devices. Of course state fee schedules also play a large role. To the extent a fee schedule addresses implants, the methodology is usually based on some variety of invoice-based pricing, such as the manufacturer's price to the hospital/facility plus a markup plus shipping and handling.

Logical, right? Transparent, right? Simple, right?

No.

Payer databases are derived from historical billing information, information that (as I'll illustrate below) is likely highly inaccurate. Therefore, basing reimbursement for the next device on past devices is fatally flawed.

Why?

In several jurisdictions (including NY TX CA (working on a change) and FL) the basis for reimbursement is some version of the "documented paid amount" plus a handling fee of 10% or so up to a cap of a few hundred dollars (CA) or a percentage of the invoice amount (FL). Illinois is also contemplating a similar arrangement.

The problem lies in the documentation of the paid amount. Most payers ask for a copy of the invoice, which, on the surface, makes sense - this is what was paid.

Not exactly. What the invoice doesn't show can include:

- volume purchase discounts

- rebates

- "3 for the price of 2" deals

- waste (some surgeons use the cage from one kit and screws from another, so the payer is paying for more hardward than is actually being used)

- internally developed invoices (documents prepared not by the supplier but by the provider)

This last point is the crux of the issue. Hospital systems often buy in bulk, with several implant kits shipped and billed; this obviously makes it impossible for the provider to produce the invoice for the device used in a specific surgery, as they never got one. Thus, many providers develop the invoice for a specific implant kit themselves.

There's another problem with implants - when they are defective, the patient has to go back in for more surgery. And the WC insurer has to pay. The only way to mitigate risk is to track the model and manufacturer for each implant - yes, it's work, and yes, it's work worth doing.

Finally, even the original invoice is for a device with a markup that is, well, huge. One analyst estimates gross margins are in the 80% range...driving profit margins that are the envy of any payer or health system.

(table from 600bn.com)

Are we ready to get serious? According to a knowledgeable source, "At the end of the day, someone has to decide that 'enough is enough' - we won't continue to pay more every year for orthopedic procedures unless we get vast improvements in patient care in return. Both Medicare and private payors appear like they might finally smell the proverbial blood in the water."

Here's hoping regulators and payers alike are also getting on the scent.

What does this mean for you?

Don't reimburse based on the invoice. Period.

Posted by at 7:14 AM | Permalink

Congress and the White House are working to come up with a fix for Medicare's big-and-getting-bigger physician reimbursement (RBRVS) problem. And as I've been saying for months, when (not if) this happens, it will have dramatic effect on health care delivery, health care costs, and insurance premiums for work comp, group, and (obviously) Medicare and Medicaid.

Briefly, the change will increase reimbursement for primary care/cognitive services/99xxx CPT codes and slightly raise payments for surgery, radiology, and similar services. The changes occur over time, with a 1.3 percent raise this year plus another 1 percent in 2011. In 2012 and 2013, primary care and preventive services get an additional raise equivalent to the increase in the gross domestic product at the time plus 2 percent, non-primary care would see a raise of GDP plus 1 percent.

The reasons Congress must address Medicare physician reimbursement are twofold; docs are increasingly dropping out of Medicare, and the current SGR process (Sustainable Growth Rate, the methodology in place today that determines what Medicare pays docs) is both responsible for that problem yet 'fixing' SGR will mean Congress has to recognize a quarter-trillion dollar addition to the deficit.

It's not quite that straight forward, but pretty close. For those who want way more detail, read this.

What is clear is that Congress has to act; what's holding up resolution now is the GOP wants the fix to be deficit neutral, while the Democrats don't. This will get resolved this week or early next (the current fix expires May 31) but there will be plenty of political point-making over the next few days. How they handle the budget issue, while significant in the large scheme of things, is a longer-term problem. Over the near term, payers and providers will have to figure out how the revisions will impact the industry.

Here are a couple scenarios to ponder.

Work comp - I discussed this in detail a couple weeks ago; the net is 33 states base their WC fee schedule on RBRVS, the key word being 'base'. A few directly tie their fee schedule to RBRVS, but most adjust the conversion factors, alter the RVUs, add a multiplier, or otherwise tweak RBRVS. And, some states do this thru the regulatory process, while others require legislative action to make significant changes to their fee schedules.

As a result, the state-level implementation of any changes CMS/Congress makes to RBRVS is unclear, state-specific, and politically influenced.

Group - Many network contracts are based on Medicare's RBRVS; if the Feds change, provider compensation will too. Think about the potential impact, and think deeply. The trickle-down will likely cause specialists to seek higher network reimbursement for two reasons - first the base from which their reimbursement (RBRVS) has declined, and second, they'll want to make up their lost revenue from Medicare by increasing reimbursement from private payers.

Finally, there's an inherent problem with the SGR approach - SGR attempts to use price to control cost. The complete failure of the SGR approach to control cost is patently obvious, as utilization continues to grow at rapid rates. This was a problem four years ago, and its done nothing but get worse. Not only does the RBRVS/SGR approach contribute to cost growth, it also 'values' procedures - doing stuff to patients - more than listening to them. Sure, the changes will somewhat address that issue, but only somewhat. And we'll still be stuck with a system that almost entirely bases physician compensation on paying for procedures.

And the more procedures that are done, the more docs make, and the higher costs are.

Pay attention to the news on this change, and think thru the long term impact on your business.

Posted by at 11:58 AM | Permalink | Comments (2)

As CMS seeks to ensure taxpayers don't pay for care due to comp, liability, or other causes, Medicare Set-Asides will become more common. And as we've seen recently, one of - if not the - biggest cost areas is pharmaceuticals.

NCCI's studies show that the older claims are, the greater percentage of spend is for drugs, which can account for as much as forty percent of spend in older claims. That, and the recent news that CMS is revising its position re some issues related to projecting future drug costs, have brought much-needed attention to this issue.

My read on the drug-cost-projection issue is simple: to a large extent, the problem is self-inflicted by the work comp industry. With some notable exceptions, most payers have simply not done enough to manage the long term drug therapies of their long term claimants. Understanding that in some states this can be problematic; that many claimants have legal representation; that evidence-based guidelines and research on the science of pain is not as robust as we'd wish; and that patients drive much of the decision making and big pharma has huge dollars to influence physicians and consumers, there's still much that can be done.

Here, in no particular order, are a few strategies worth considering.

1. Partner with a PBM that has a strong clinical orientation coupled with data mining expertise.

2. Motivate adjusters and case managers to identify potentially problematic drug usage and give them the tools and clinical back-up to do something to forestall issues.

3. Put in place early warning processes and flags to identify claims that appear to be heading towards questionable drug use or use of medications with uncertain benefits for the comp injury.

4. Assess the various evidence-based clinical guidelines and determine if they can help your claims staff.

5. Identify physicians with appropriate and potentially inappropriate prescribing patterns, assess those patterns, and determine how best to use that information to direct claimants and 'mange' physicians.

6. Encourage treating physicians to use opioid contracts and drug testing in their normal course of practice.

Most importantly, be proactive. Don't whine, complain, and blame the system, pharma, bad docs. They all may be contributors, but blaming them doesn't solve the payer's problem - action does.

What does this mean for you?

Addressing drug usage early and intelligently can dramatically reduce MSA settlement costs. Oh, and it can certainly help cut indemnity and reduce disability duration as well.

Posted by at 8:23 AM | Permalink | Comments (1)

My post on Monday about the internal memo released by CMS regarding MSA allocations triggered a round of name-calling, motive-assumption, and general nastiness by people in the MSA business furious that I awarded PMSI much of the credit for the change.

That, and/or the change has been described as not material and raising more questions.

Here's how I put it Monday.

"[MD Kent] Takemoto has been working with CMS for over a year in an effort to revise/revamp/redo the methodology used by CMS to calculate/estimate drug costs in Medicare Set-Aside allocations.

After multiple meetings, lots of analysis (both mathematical and scientific) of drugs commonly used in comp v drugs not commonly used, drug substitution, and plenty of persistence Kent's efforts have borne fruit...The methodology developed by PMSI and approved last week by CMS is a major step in the right direction."

I was contacted by several individuals who claimed that they or their organization were at least partially responsible for the revision; I asked each to provide documentation of their activity, noting I'd "be happy to amend my post if necessary." I'd hasten to add that some correspondents were professional and courteous; others engaged in name-calling and inferred I wrote the post to somehow ingratiate myself with PMSI, or because PMSI is a client, or was somehow duped by PMSI.

Let me address each in turn.

Name-calling - either grow up or shut up.

Clients - As long-time readers are well aware, I ALWAYS note when a client is mentioned on the blog. Therefore, insinuating that I wrote this to aid a client is flat out wrong.

Marketing - I have written complimentary posts about numerous companies and organizations that are NOT clients, including Aetna, Harbor Health, Broadspire, SRS, Progressive Medical, Mitchell, Medata, Datacare; heck, I've even written nice things about Coventry. Inferring that I wrote the post to schmooze PMSI, a company I've taken to task rather bluntly in the past, reflects poorly on those who would make that inference.

Duped - There's ample evidence that PMSI did, in fact, help CMS develop solutions to several key issues, solutions that will help the entire industry. Yes, this will certainly help PMSI, as their methodology was approved by CMS; it will also help payers, PMSI's competitors, and CMS over the long run.

As I stated in the original post, the CMS memo came "After multiple meetings, lots of analysis (both mathematical and scientific) of drugs commonly used in comp v drugs not commonly used, drug substitution...". I've seen research documents, email correspondence, visitor passes, and other materials pertaining to PMSI's efforts. It is abundantly clear that PMSI and Takemoto expended a lot of effort and brain power to develop a solution.

I spoke with PMSI CEO Eileen Auen about this (Auen is a highly respected and very well regarded executive and a person for whom I have the utmost regard). She verified my understanding of the research and analytical work put into the problem by PMSI, noting the level of effort was commensurate with the result. But what Auen really wanted to focus on was the positive impact of the revision on all payers, and her desire to see the industry working more closely together on this and other issues. As Eileen told me, "others have also worked to advocate for change - we applaud their efforts. Perhaps the lesson out of this, is that the MSA industry should find ways to collaborate more closely (like we have in Pharmacy and Ancillary Service) to drive an industry agenda."

I asked two of my critics to provide me with documentation of their role in effecting this change at CMS. One said they wouldn't as PMSI is an HSA client, the other said they would provide such documentation but as of this moment has not.

I've no doubt that many individuals and organizations spoke to CMS, sent letters, complained, called, sent emails, and met with individuals at CMS about issues related to MSA allocation calculation bases and methodology. Their efforts and attempts to resolve a very difficult issue are laudable. If any of them played a material role in effecting this change, they have yet to share evidence of that role with me. If and when they do, I'll review it, give credit where credit is due and write it up for your reading pleasure.

Until then, I stand by my post.

Now - could we please get back to work?

Posted by at 9:59 AM | Permalink | Comments (5)

Following RIMs, it was off to NCCI for their conference, then a furious few days to catch up and follow up and get a couple deliverables out.

Now that there's a few minutes to go back thru my notes from RIMS, there were a couple interesting takeaways.

First, I met with Healthcare Solutions (HCS) (the product of the Cypress Care and Procura 'merger'). While there's been a good deal of drama around the company of late, I was there to discuss their recent work with Broadspire to develop a process whereby a payer can develop a 'formulary' for DME, thereby using clinical guidelines to determine and prospectively approve specific DME for specific conditions - and excluding 'non-approved' items.

DME has long been a bit of a black box in comp; equipment is tough to categorize or code; while some items are pretty straightforward, others can have varying options or functions (think wheelchair - then think power; high-weight-capacity; long-term usage v temporary usage; narrow v wide; wide tires for outdoor usage v normal width...). HCS' approach enables payers to exert more control over which equipment is pre-approved and which requires an additional OK to authorize.

There's two parts to this - the clinical guidelines, which are developed by, unique to, and managed by the payer (in this case Broadspire) and the infrastructure/technology which was developed by HCS.

The infrastructure can be adapted to other payers' 'formularies'; HCS will likely seek to work with other payers a few months down the road.

Linking the notoriously difficult-to-manage DME supply business with clinical guidelines makes sense; implementing this, and addressing those DME scripts that are questionable may be a bit tougher. This wouldn't be much different from 'regular' UR, where there are always appeals processes and mechanisms to work thru uncertainty.

Sticking with Broadspire, I also viewed a demo of their eTriage technology. eTriage is a predictive tool that has been in place at Broadspire/Crawford for some time, and has undergone revisions and updating since its adoption a few years back. According to Broadspire's Gary Anderberg, eTriage takes a good bit of the mystery out of determining which claims are going to go bad, an ongoing challenge for the entire work comp industry. eTriage is an algorithm-based 'guided' interview tool that includes questions about pain, functionality, the employer-employee relationship, and other issues that have been found to contribute to disability duration.

The next question is usually based on the response to the last question, enabling the interviewer to dig into behaviors, beliefs, and patterns. While there is a free-form text-entry capability, the app is heavily oriented towards pre-filled responses based on drop down menus.

eTriage is designed to help payers identify those claims that may appear relatively benign but turn long and costly. These 'middle' claims fall between the other two general claim 'types' (my definition not their's) which are much more readily categorized - routine bumps and cuts, and catastrophic or near-catastrophic claims.

I also met with Progressive Medical to hear about their just-released drug trends report. Jason Winters, RPh, told me Progressive's book of business had experienced good results in 2009, despite an increase in brand drug prices of 8.1%. According to Winters, "overall reduction for the year per drug-using injured party was 1.9 percent, despite blended awp increase of 5.2 percent and an increase in total days supply prescribed of 2.6 percent." Among the favorable data points, Actiq costs were down 28%, duragesic costs declined 10%, and Oxycontin costs also dropped.

To some extent Opana may be increasing share at the expense of Oxycontin, as costs for Opana trended up over the previous year.

(none of the firms mentioned herein are HSA clients)

Posted by at 6:24 AM | Permalink

When you get a call late on a Friday, it's usually good news - if it was bad, they'd usually wait till Monday rather than ruin your weekend.

The call I received from Kent Takemoto, MD, President of PMSI Settlement Solutions on Friday was definitely good news. Takeomoto has been working with CMS for over a year in an effort to revise/revamp/redo the methodology used by CMS to calculate/estimate drug costs in Medicare Set-Aside allocations.

After multiple meetings, lots of analysis (both mathematical and scientific) of drugs commonly used in comp v drugs not commonly used, drug substitution, and plenty of persistence Kent's efforts have borne fruit.

An internal CMS memo obtained from sources states:

"For a Part D drug to be covered by Medicare, and thus included properly in a WCMSA, the drug should be prescribed for an outpatient use that is approved under the Federal Food, Drug, and Cosmetic Act [21 U.S.C.A. Sec. 301 et seq.]".

So...that means...what?

Some background would be helpful...

First, understand that the whole MSA process/regulation/motivation is to to make sure private industry pays for the medical care for work comp - and other - conditions, injuries, and illnesses and not taxpayers.

Unfortunately, in attempting to implement a process to achieve this noble goal, CMS came out with what most in the industry were rather heavy-handed and inappropriate ways for payers to calculate their liability for drug costs. When one considers that drugs accounted for 26% of MSA costs for PMSI's pre-6.1.2009 MSAs, that's a lot on the table.

Moreover, about 17% of open work comp claims were for individuals that were already Medicare beneficiaries, half of whom were under 65. Settling these claims cost an average of 63% more to settle due to CMS' drug pricing methodology. In addition, CMS required payers to price drugs at the lowest Redbook published rate (not factoring in the discount which most PBMs provide, which tends to be somewhat to significantly less than Redbook AWP) for the entire life expectancy or rated age of the claimant. This essentially assumed the claimant would be taking the same drugs, at the same frequency and dose at list price, as long as they were alive; CMS specifically refused to consider the potential change in drug usage due to Drug Utilization Review tools and processes.

It's no wonder many payers stopped settling claims, as the cost would have been prohibitive.

The methodology developed by PMSI and approved last week by CMS is a major step in the right direction and incorporates what Takemoto feels is the most significant change to the calculation of MSA drug allocations - the exclusion of drugs not covered by Medicare Part D. Drugs that are not covered by Part D comprise approximately 2/3 of the most commonly prescribed drugs in workers compensation including the overutilized and exorbitantly expensive opioid, Actiq.

Although CMS is implementing this change on June 1, 2010, PMSI has been excluding non-Part D medications from MSAs for about 9 months now. This requires a deep understanding of occupational diagnoses and how they relate to the FDA approved uses of a medication as well as appropriate medication substitution for the disallowed medications. When done properly,their experience shows that about 70% of CMS submitted MSAs contained drugs that were excluded from coverage under Medicare Part D.

So...why is this a big deal?

It will mean big reductions in the amounts payers have to 'set aside' for Medicare for drugs - Takemoto's estimates range from 'tens of thousands of dollars to hundreds of thousands per MSA'.

And payers can go back to settling claims.

Posted by at 6:43 AM | Permalink | Comments (9)

I've been somewhat reluctant to write this post, as it takes issue with one of the key presenters at a workers comp conference that I believe is consistently the best I've attended. It's here for one reason: it illustrates how a public podium must be treated with respect and the audience given all the relevant information so each can draw their own conclusion.

Scott Harrington PhD, was on the podium at NCCI last Thursday afternoon discussing the future of Federal healthcare reform, reform legislation, and the implementation of reform. He's a very knowledgeable and highly intelligent guy, but his presentation was marred by what I consider rather striking bias.

Harrington led off by noting that he is a rare professor in that he is an avowed conservative. No problem with that; many in the insurance community tend to be more on the conservative side, but there's no shortage of liberal-leaning insurance execs either (although they tend to be relatively quiet about their inclinations).

No, the issue was he allowed his bias to affect what was an important topic, and one of interest to most of the attendees - of health reform and the goings-on in Washington. At the end of Harrington's talk, I was left wondering what was reality, what was his slanted interpretation of reality, and whether anything he said could be taken at face value.

Here's what caused my consternation.

The uninsured population

Harrington contended that of the 46 million uninsured, 10 million are eligible for coverage thru their employers but have not signed up, and an additional 11-12 million have incomes above 300 percent of the Federal poverty level, and therefore could buy insurance if they wanted to. Harrington's point was people are uninsured because they choose to be.

That's just not true. 300% of the federal poverty level is $66,150 for a family. The average health insurance premium is over $15,000, not including deductibles, copays, coinsurance, and the cost of healthcare for conditions not covered by insurance. Health insurance is unaffordable for many people. Is that a 'choice' issue? Perhaps - many 'choose' to pay rent and buy food instead of insurance.

Moreover, individuals with pre-existing conditions can't get any coverage for those conditions in many states and have to pay a big upcharge in others. If you have diabetes and hypertension, what insurance company who doesn't have to cover you will?

The employer-sponsored issue is less clear, but still problematic. Many smaller employers offer insurance but require workers to pay a big chunk of the premiums; this is especially prevalent among smaller employers. Workers in the lower income brackets would have to pay their part of the premium - typically between 20% and 50% of the total cost, plus the additional deductibles, copays, and coinsurance. For a worker making $20 an hour with a family of three, that's a little over $40k per year. If their employer requires them to pay a third, that's $5000 before the deductible, which in many cases is at least a couple thousand bucks.

The Medicaid picture is cloudier still, but Harrington's inference that many who are eligible haven't sign up is quite simplistic. Research indicates many of the eligible-but-unenrolled are those with language barriers, live in states that have done little to promote the program or educate potential enrollees, and/or have significant mental issues that inhibit efforts to enroll them or are kids.

Harrington's attempt to pooh-pooh the uninsurance problem would have been more compelling had he treated it objectively. There is no question some individuals go without health insurance out of choice - Rush Limbaugh comes to mind. But Rush makes just a bit more than $66k a year.

Deficits

Harrington next took on the Medicare deficit, pointing out (accurately) it would rise to $38 trillion by 2008. He then shared a bunch of scary statistics about the size of the debt, amount per person; all in an attempt to point out the unaffordability of the current system.

That wasn't exactly new news. Where Harrington went off the reservation is his inference that this was somehow the fault of the Democratic Congress and President. In his concluding remarks, Harrington claimed that if the GOP takes over Congress and the White House, the mandate and insurance provisions could be repealed, reductions in Medicare would be legislated, and this would lead to lower costs and deficits.

I'm not sure which Republican party Harrington was talking about; it certainly wasn't the one we've seen in power for most of the last decade.

For example.

Medicare Part D was passed and signed by Republicans, with "no dedicated financing, no offsets and no revenue-raisers; 100% of the cost simply added to the federal budget deficit". The same Medicare Actuary quoted by Harrington, in the 2009 report to Congress, (pdf) reported that the GOP-passed Part D program has contributed $9.4 trillion to the $38 trillion Federal healthcare deficit. (page 126)

I'd also point out that the same Republican Congress and Administration was responsible for preventing Medicare from considering any cost-benefit criteria in determining whether and what Medicare would pay for procedures, drugs, treatments, devices, etc. Yep, these deficit hawks thought it was just fine for we taxpayers to be forced to pay for procedures with very little efficacy.

(the pertinent language from the 2003 Medicare Modernization Act reads as follows - CMS will pay for items or services "reasonable and necessary for the diagnosis and treatment of illness or injury or to improve the functioning of a malformed body member" (Fed Reg 65-95, p 31124- 31129, 2003 MMA); there is no mention of cost)

Finally, I think it is important to reflect on a simple fact. If private industry had been able to control health care costs, we wouldn't be having this discussion. The fact is, for whatever reason, the for-profit, and not-for-profit health care insurance and delivery system has been unable to control costs and consistently deliver quality care.

There's no question the current health reform bill has major flaws; a lack of cost control is perhaps the most glaring. I've taken issue with the law, its future cost, the lack of attention to cost, and the failure of both parties to deal with these tough issues. I will continue to do so, and will continue to keep in mind the singular importance of presenting the facts, data, and logic supporting my views, and address opposing opinions that are similarly supported.

And I'm sure you'll keep me honest.

Posted by at 8:36 AM | Permalink | Comments (2)

Not if your case is highly visible, politically sensitive and focuses on unethical and possibly illegal activity by an Assistant State's Attorney.

I'm referring to Sandy Blunt's pending appeal before the ND Supreme Court.

Blunt has been waiting - and waiting - and waiting for the Court to issue a ruling in the appeal of his conviction on (highly suspect) charges of inappropriate use of state funds.

Fifteen months ago Blunt's lawyer filed his appeal, The appeal was in part based on their contention that the prosecutor didn't give Blunt's attorney exculpatory evidence that would have proven that the most important charge against Blunt wasn't a crime.

Among other transgressions, the prosecutor didn't give the memo from the state auditor, a memo that clearly exonerated Blunt, to Blunt's attorney.

Yesterday, the Court issued 20 new opinions. Each and every one of the opinions was from an oral argument that took place after Blunt's. Adding insult to injury, 18 of the 20 opinions were from 2010 oral arguments with many of the 18 from March and April dates (one even from just 8 days ago on May 3).

Oral arguments in Blunt's case were heard ten months ago.

Why hasn't the Court issued their ruling?

Could it be the Court is delaying issuing their ruling until after the June 8 primary elections for (among other offices) District Court Judge? What does that have to do with Blunt's case? Well, the Burleigh County Assistant State's Attorney who is the object of the appeal happens to be running for - you guessed it - District Court Judge.

Reports from ND indicate Cynthia Feland is running a nonstop campaign for office, complete with Facebook page (check out the recipes...), an effort that has her taking time out of her valuable workday to stick campaign signs into supporters' yards.

Yep, this is the same 'Cynthia Feland' currently under investigation by the State Police for potential crimes including conspiracy. The state Bar Association has also determined Feland's actions during the Blunt trial merit investigation.

So let's sum this up.

Blunt's conviction may well have been obtained illegally. And the 'illegality' isn't some technicality, but rather a blatant and successful, effort to mislead the jury.

The prosecutor may well have committed a crime during the case, and if not, has at the very least caused two separate organizations to begin investigations into her (possibly criminal) activities.

The state Supreme Court has refused to issue a ruling in the case that triggered the two investigations, despite it's clear and public commitment to speedy trials. (which includes this statement - "A goal of the judicial system of North Dakota is prompt disposition of cases."

Except when that case is politically sensitive and affects a prosecutor accused of criminal behavior.

(Disclosure - I've had the honor and privilege of working with Sandy Blunt on two engagements. I met Sandy after I began writing about the goings-on at ND's state work comp fund)>

Posted by at 7:14 AM | Permalink | Comments (1)

Colleague Sandy Blunt will be leading a webinar on workers comp claims IT systems sponsored by FINEOS. As the former CEO of a work comp insurer that selected a new claims system, Sandy has first-hand knowledge of the issue, and as a thoughtful and pragmatic manager, he knows that what makes sense on the 'C' level must actually work at the 'desk' level.

The webinar focuses on recent trends in the comp industry and technologies and techniques payers can use to adapt to, and take advantage of, these trends.

The webinar, which is complimentary, has 370 participants as of today. That's a remarkable number and a reflection of the work comp community's strong interest in new technology.

If you haven't already, you can register here.

(Disclosure - I've had the honor and privilege of working with Sandy on several projects, and he is leading my firm's First Annual Survey of Workers Comp Claims IT Systems; I have no relationship with FINEOS. )

Posted by at 12:02 PM | Permalink

Much of my writing over the past few weeks has focused on the future of work comp - the impact of reform, economic influences, the increasing negotiating power of health systems, changes in Medicare's physician fee schedule (which WILL impact work comp), revisions to Medicare facility reimbursement...

My last post covered what's 'just over the horizon'; specifically the growing marketing power of providers and resulting higher facility costs.

There are two other 'over the horizon' issues comp payers would do well to watch - pharma and physician reimbursement.

Here's the quick and dirty.

Pharma pricing - specifically for branded drugs - was up over nine percent last year, and I wouldn't be surprised to see that trend continue. At some point the Congressional Dems and White House may decide to get serious about controlling Medicare drug costs and change the law to allow HHS to negotiate pricing with big pharma. It would be a 'win' for the Democrats as it would:

- help reduce Medicare's future liability (the Medicare Actuary reported late last year that the ultimate unfunded liability for the Part D program is about $20 trillion)

- put their political opponents into a box; by cutting the deficit the Dems would address one of their biggest political problems while putting Republicans into a tough spot; the GOP would have to choose between getting behind big pharma and therefore increasing the deficit or reducing the deficit and thereby agreeing with the Dems (horrors, bipartisanship!!).

If Medicare does negotiate pricing, there may well be an attempt on the part of pharma to raise prices paid by other buyers - I'm talking about you, dear reader.

Regardless, the end of First DataBank's publication of AWP (within the year) means the 33 states that use AWP as the basis for their WC drug fee schedules have to come up with something different. Some have already chosen the "Red" version of the "book"; Redbook is fine, but it doesn't include some generic pain meds, is not as up to date as it should be, and is viewed by many in the payer community as 'favoring' the pharmacy.

Out of time - we'll do physician fee schedules tomorrow...

Posted by at 8:51 AM | Permalink | Comments (1)

The much-anticipated 'State of the Line' presentation by NCCI's Dennis Mealy (which will be available on ncci.com's website next week) is the highlight of the Symposium. Here's what Dennis had to say.

First, the overall property and casualty (P&C) industry's results weren't too bad, despite a 3.7% drop in net written premium from 2008. And the combined ratio industry-wide improved three points to 101, led by property's strong results. The decent news helped keep the combined ratio for the last seven years well under the historic average.

Dennis got into detail re the decline in comp premium over the last few years, and his numbers included high deductible plans and keeping everything consistent by putting historical costs on a common rate level. The net indicated comp in 2007 would have been $89 billion on a common rate basis if all comp was insured, declining to $76 billion in 2009.

The combined ratio - medical and indemnity expense plus admin expense - was up nine points to 110 in 2009, a big jump from their initial prediction back in September of a 106. The difference was driven largely by a big addition to reserves by one large carrier - an addition of about a billion dollars.

Without that reserve adjustment, the combined would have been about 107.

NCCI is making a big investment in, and focusing on, medical costs going forward. While they've always reported on medical costs, expect their emphasis to increase led by the Medical Data Call and results and uses thereof.

Comp medical costs per lost time claim went up five points, an improvement over last year's 6.7%, but consistent with the last few years. (I'd note that the preliminary numbers for 2008 provided in the SoL indicated a 6.0% increase)

Medical costs now seem stuck at 58% of claim costs.

Frequency may spike just a bit as employment grows, but Mealy does not expect the two-decade-long downward trend in frequency to turn around.

Dennis closed with a discussion of the potential impact of the health reform bill and the implementation thereof, a topic I'm going to be speaking on later today (if you'd like a copy of my presentation email infoAThealthstrategyassocDOTcom). His main points were the direct impact of the Black Lung Entitlement and potential changes to Medicare reimbursement; this last is a two part process, first being what do the Feds do, and then what do the states do in response to any Federal changes in Medicare reimbursement.

Dennis noted that among the other issues worth watching are the effect of

- increased health care coverage among the general population

- consumers' greater access to drugs, particularly generics

- new taxes on pharma, devices, and health insurance companies

- Medicare secondary payer issues

I'd highly recommend everyone affiliated with the comp industry get a copy of Dennis' presentation; again it will be available next week on the ncci.com website. His historical perspective and awareness of national as well as state-specific issues provides insight that's not available anywhere else.

Posted by at 9:04 AM | Permalink | Comments (1)

NCCI President Stephan Klingel led off this year's NCCI Annual Issues Symposium with a brief intro, and his lead in wasn't exactly encouraging, predicting a 'precarious' outlook for the workers comp market.

The factors that led NCCI to characterize work comp's future as precarious were the recession, recovery, Federal environment, and other external factors.

Remember, Klingel's comments reflect what happened over the last couple years and the uncertainty driven by those factors. And there's no question the recession and other factors have had a huge impact on comp; in fact private carrier net written premium (NWP) dropped by almost twelve points ($5.2 billion) over the last year.

That's bad. What's much worse is comparing 2009 to 2005, which shows a decrease of $13.7 billion in NWP for private carriers and state funds. That's a drop of 29%.

This is a result of a decline in three areas: the number of workers employed; the hours those employed workers actually worked; and the industries most affected by the recession - manufacturing and construction. Those two sectors account for a fifth of payroll, but 40% of work comp premium.

As these are two of the most important industries to work comp, it isn't a surprise that comp premiums declined dramatically.

As recovery continues, NCCI expects frequency will, if not increase, at least level off from teh past two decades of annual declines.

Klingel got into some detail re the provisions of the reform law that directly impact workers comp, focusing on the changes to black lung.

One of the more interesting points was a brief discussion of the potential for medical cost shifting; Klingel stated that work comp is the largest single source of reimbursement for the health care system that is not regulated in some way by the Federal government. (I don't agree with the premise, which requires one to equate the mandatory medical loss ratio as Federal control over medical payments, an 'equation' that requires a couple leaps)

More Federal involvement with insurance is likely, according to NCCI's President, who believes there will be a Federal office of insurance information (name tbd) - this requires legislation to be passed by Congress and signed into law by President Obama, after which the regulation writers would control the actual implementation.

The 'Baca bill' continues to languish, although there may (operative word being 'may') be some implications for a Federal insurance office.

Posted by at 8:32 AM | Permalink

Other conferences may be hurting, with corporate travel restrictions cutting attendance, but that doesn't appear to be the case at this year's NCCI Annual Issues Symposium.

While we'll have to wait for a few more minutes to hear Dennis Mealy's Annual state of the industry presentation, what is clear from conversations at the opening reception, and the number of people attending, is this is a dynamic time in work comp, with lots of external factors (reform, recession, investment returns, technology, CMS) pushing, pulling, and twisting comp companies in ways they've never been pushed, pulled, or twisted before.

here are a few of the early highlights from NCCI's press release...

- the 2009 accident year combined ratio is up 5 points from the previous year to 107

- the calendar year combined was up even more, climbing 9 points to 110

- pricing continued to decline in 2009, not helping carriers' reserve situation which also worsened albeit slightly

- medical cost increases moderated somewhat, although they remain a couple pointds above overall medical inflation

- indemnity claim costs also continue to rise, with a similar moderating trend.

more to come.

Posted by at 7:18 AM | Permalink

Heading out to NCCI's Annual Issues Symposium this morning, where I'll be 'covering' the conference on MCM and speaking on a panel with David Deitz, MD PhD and Barry Lipton FCAS on "Understanding Key Workers Comp Medical Issues".

A good bit of the agenda is dedicated to exploring regulatory, reform, and post-reform issues; Dennis Mealy's State of the Line presentation will also attract a lot of attention.

For those yet to attend an NCCI AIS, I found it to be the most productive workers comp conference I've been to. The presentations typically get into lots of data and detail, the NCCI folks provide a wealth of insight and information, much of which can be used to help comp industry participants determine where the industry is going and what it means for them.

See you in Orlando.

Posted by at 6:44 AM | Permalink | Comments (1)

Numbers released by the Institute for Supply Management indicate manufacturing activity increased in April for the fifth consecutive month, while public construction was also up.

The manufacturing numbers were the strongest they've been since June 2004, and according to a piece in MarketWatch; "Norbert Ore, chairman of the ISM's manufacturing survey committee, said there was no reason that the improvement in the factory sector couldn't continue. [emphasis added] "Overall it is an excellent report. The manufacturing sector is in a significant recovery."

Spending in the consumer market also increased significantly, to levels not only higher than just before the recession, but breaking previous all-time records. The rise was driven in large part by higher spending on autos, a welcome sign for manufacturers around the country and their distribution systems.
Overall economic indicators continue to trend up, a welcome sign for a work comp industry hammered by a long soft market, under-pricing, rising medical expenses, and reduced frequency.

Good news two days in a row...

Posted by at 8:26 AM | Permalink

When the huge Chinese treasure fleets up-anchored and raised their sails, their mission was simple, the execution of that mission anything but.

Expanding Chinese influence and trading was the goal, a goal that required designing, building, crewing, and training a navy that could sail into uncharted waters with unknown weather, currents, navigational hazards, and enemies and return to their home ports with valuable cargo.

Needless to say, the routes taken by the fleets are littered with wrecks, as the ships were driven ashore by typhoons, wrecked on unknown shoals, and sunk by rogue waves.

While the dangers were there, so were the skills of the shipbuilders, crews, and officers.

Therein lies the lesson for work comp.

Over the near term, premium receipts are likely to increase, driven by higher employment in the health care, manufacturing, logistics, and some day possibly construction sectors. There are some early signs, as Roberto Ceniceros reports in Comp Time. On the claims side, Concentra's clinics saw an increase in initial patient visits in the last quarter of 2009, and that trend has continued so far this year.

NCCI has researched the relationship between increasing post-recession employment and injury rates, and the anecdotal information provided by Concentra is consistent with their findings. Their report read in part "Job creation is related to an increase in the proportion of workers who are inexperienced in their current job and, hence, more likely to sustain a workplace injury."

As firms staff up to meet demand for new houses, cars, and services, the faster pace of work, coupled with the inexperience of the new hires, will likely result in more injuries both in total and as a function of hours worked. Again, according to NCCI, "On net, the effect of job creation dominates quantitatively, thus generating the observed pro cyclical behavior in the growth rate of workplace injury and illness incidence rates. Further, it is shown that the growth rate of frequency tends to overshoot during economic recoveries, although this effect is not common to all recessions."

Concentra 'battened down the hatches' a couple years ago in an effort to hang in there while waiting for the economy to rebound. Investments in improving the 'patient experience' were also made, and according to CEO Jim Greenwood, these investments are probably contributing to the uptick in visits.

There's no question work comp is largely driven by employment, and we're seeing encouraging signs that things are looking much brighter.

The better-but-still-not-good-but-nonetheless-welcome employment news heartened several TPA execs I spoke with last week at RIMS. This is likely linked to evidence of firming TPA per-claim pricing in some areas and sectors; the sense was the improving economy, the Sedgwick deal, and specific growth in manufacturing and temp hiring will lead to a 2010 that is a significant improvement over '09. News from the midwest indicates manufacturing activity, new orders, backlog, and employment all rose in April, led by Caterpillar's announcement it is rehiring 9000 workers.

Across the country, the economy has grown for three quarters in a row, and some economists are expecting this to accelerate, creating hundreds of thousands of jobs in the process. If current patterns continue for the rest of the year, there will be about four million new jobs created since the signing of the Stimulus Bill.

Even Warren Buffet is excited...

On the medical expense side, the nearest term will likely be most affected by drug costs. Expect drug prices to level off (after last year's 9.3% brand drug price increase) somewhat, but watch carefully: if pharma thinks the Feds are going to negotiate prices for Medicare Part D, we may well see another jump in price.

State drug fee schedules are already starting to change to reflect BlueBook's demise; New York has decided to use RedBook and sources indicate other states are exploring that alternative as well. With the demise now ten months away, expect activity to accelerate.

What does this mean for you?

Good news on a Monday is always welcome. If employment continues to increase (April numbers will be out by 8:15 est today) insurers, TPAs, and managed care firms can expect decent growth after a year and a half of misery.

Posted by at 6:43 AM | Permalink

Coventry released its Q1 2010 financials today, and looking at the numbers one would have to be a naysayer to find fault. The company is successfully exiting the Medicare Private Fee for Service business, growing its Medicare, Medicaid, and Part D revenues, and has also seen an increase in commercial membership.

From a financial perspective, earnings are on a solid path and guidance is up over previous numbers. Medical Loss Ratios are well under control across all products, reserve development has been positive, enrollment in governmental programs is strong, and commercial membership is up by a bit.

While one would think it's all good, I'm less sanguine.

Commercial membership was up due to an acquisition in Kansas, a region of growing interest at Coventry. Same store growth was actually negative by 20,000 members - not surprising given the economy, but nonetheless something to watch.

MLRs are being 'managed' more by rate increases than by 'managing' the medical; while Chairman and CEO Allen Wise talked a bit about the need to be the low cost provider, there wasn't much - if any - discussion of exactly how Coventry was going to do this beyond identifying good providers and narrowing their networks to focus on those providers.

That's all well and good, but any health plan can figure out who the 'good' providers are and strike a deal, and many of Coventry's competitors are quite a bit larger, have lots more members, and therefore have greater leverage.

The skills, assets, and capabilities a health plan will need to survive and prosper in the future are fundamentally different from those that Coventry has deployed so adroitly in the last few quarters. Successful healthplans will be those with:

- market share that enables them to negotiate from a position of strength in each geographic market

- a strong, positive brand image in the employer and individual sectors

- skill and deep knowledge in medical management, including data mining and especially chronic care management

Less successful healthplans will:

- not be among the market leaders in their geographic targets

- have long and highly successful traditions of risk selection and underwriting, attributes that are of far less importance in the brave new post-reform world

- be late to the medical management party, with a culture more akin to the old indemnity insurance companies than a true Health Maintenance Organization.

When you step back and look at what's made Coventry's resurgence possible, it's fairly simple - getting out of unprofitable businesses, risk selection and underwriting, careful management of the Medical Loss Ratio through pricing.

All valuable and necessary, but not nearly as important in the future as brand, share, and medical management

So what's the future hold for Coventry?

Corporate culture is brutally hard to change, and Coventry's culture is built on risk selection, tough price negotiation with providers, and an intense focus on the numbers. While one would think these are assets in any market and some of those skills are indeed critical in any market, some will actually be counterproductive in the post-reform world.

Despite what Coventry's leadership says, and I'm sure believes, Coventry is not now, and will never be, the low cost supplier in most of their markets - they just don't have the negotiating leverage with providers. In the past this was OK; what they didn't have in buying power they more than compensated for with admirable skill in risk selection.

Coventry appears to be working closely with Wichita Kansas health care system Via Christi; owners of the HMO just bought by Coventry, and the provider for a new Medicare Advantage product offered by Coventry as well. If Coventry is going to be successful they are going to have to build lots of similar relationships fairly quickly. I would be remiss if I didn't note that Coventry's HMO/PPO share in the state is second (at 19%) to the Blues at 37%.

That skill will be of very little value in the future.

Posted by at 7:06 AM | Permalink | Comments (3)

Big changes are in store for work comp, changes brought on by a much-altered economy, health reform, technological leaps, health care provider behavior, governmental influences, budgetary shifts, and demographics.

Driving home from RIMS yesterday, I was struggling to come up with a way of explaining what's coming in a way that captured where we are today and what the next few years will look like. Fried after three days of nonstop meetings, I flipped on the stereo and there was the answer.

I'd been listening to a book-on-CD entitled '1421, The Year China Discovered the World' by Gavin Menzies. An amazing read (or more properly listen), Menzies spent years reconstructing data from sources around the world, data that build a compelling (and controversial) case for his contention that huge Chinese treasure fleets comprised of hundreds of massive ships circumnavigated the globe seventy years before Europeans got in their tiny ships to sail to the Americas.

According to Menzies, the Chinese built a huge treasure fleet, far more sophisticated and capable than anything the West could even contemplate, and set forth to chart the world's oceans and continents. They knew a lot about navigation, but there were big gaps in that knowledge. They also had little information about what they would find as they sailed thousands of miles from their home waters.

Their ships, square-rigged and large beyond comprehension for the time, could only sail before the wind, thus they were forced to go where prevailing winds and currents took them. China's admirals, many of whom were brilliant navigators and leaders, had some charts from previous expeditions and well-built ships designed specifically for years' long voyages; but by the very nature of their task they were indeed venturing into uncharted waters.

The parallels are certainly clear.

Work comp payers and vendors can't do what macro influences, the law and the markets don't allow - at least not for long. We can trim our sails, keep a sharp lookout, carefully question those who have some knowledge about where we appear to be heading, and plan and practice what we'll do as we come across new challenges and perils.

What we can't do is stay in the harbor. Like it or not, we're on the seas heading for places we know not.

Over the next few days I'll draw more parallels (for nautically inclined readers, pun intended) and climb to the highest crow's nest to peer ahead.

(Note - Menzies has been severely criticized for some of his methods and conclusions; nonetheless there is ample evidence that Chinese sailors made their way to Africa and many other destinations thousands of miles from their home ports)

Posted by at 7:10 AM | Permalink | Comments (1)

The comp industry spends millions on utilization review - certifying a procedure, hospital stay, therapy, or treatment as 'necessary' - or not. What most payers don't realize, or, more correctly, probably realize and don't discuss, is the reality that their UR systems are not linked to bill review platforms, so if the procedure/therapy/treatment is delivered and billed, in far too many cases it is paid.

That's not to say payers don't spend a lot of time, resource, and effort trying to link UR and BR, but the 'link' is largely manual, requiring bill review processors to stop what they're doing, look at (in many instances) a different software application or database, interpret the free form text, and manually enter payment recommendations and explanation codes.

Which is a waste not only of administrative effort, but medical dollars as well.

I'd long heard about this, and seen it in many of the audits of managed care programs my firm conducted, but until I surveyed most of the largest payers in the nation last year I didn't fully grasp how pervasive this is. (if you want a copy of the survey do not leave a comment to this post, rather email infoAThealthstrategyassocDOTcom)

The problem

The current challenge facing all bill review application vendors is a limited ability to interface with UR software products in general. Most UR software platforms capture their decisions in a narrative form, in text or free-form fields. Therein lies the problem; UR decisions must be capable of being placed in a file format that computers can recognize. Moreover, each payer has their own unique approach, set of UR guidelines, interpretation of state UR rules, and customer requirements, making the integration of bill review and UR doubly difficult.

Potential solutions

Now two bill review companies are working to address that problem. Mitchell, which markets the SmartAdviser application, will be releasing an internally-developed service, entitled Utilization Review Decision Manager, that is designed to automate the feed of utilization review determinations. The idea is to enable customers to auto-adjudicate bills and individual services that up till now people had to research and authorize manually. The new app is slated to be on the market in July of this year; it is currently about to enter the testing phase. That's a very tight timetable, but SmartAdviser's General Manager Nina Smith advised me in a call yesterday that Mitchell is committed to hitting the date.

The app, which is 'enabled' by SmartAdviser's Capstone business rules engine, uses a proprietary approach to group procedure codes into a treatment group according to diagnosis, the idea being approval of a carpal tunnel release includes 'approval' of related services - facility charges, PT, anesthesia, etc. Mitchell expects the app to increase 'throughput' (bills not touched by a reviewer) by about 17%.

Competitor Medata implemented their solution about a year ago; according to Cy King, Medata's CEO, the company rolled it out with a very large retail client who is quite pleased with the results. So far, client savings have increased from 5% - 7% depending on the month. Components of the solution are provided by Datacare through their Bill Zee product.

King reported that Medata is currently working on several additional implementations.

I'd note that it is entirely possible the other bill review vendors (CompIQ, Stratacare Coventry) offer similar UR-integration functionality, but at least as of last summer, no one was using them. If this is of interest, you can ask them at RIMS next week in Boston.

What does this mean for you?

Hopefully more efficiency and lower medical expense. Hopefully.

Posted by at 8:29 AM | Permalink | Comments (3)

I posted on the growing problem of hospital costs in California a few days ago, and since then I've been working on a project to identify facilities to include - and exclude - from its MPN (California's version of a certified work comp provider network)

It's sometimes tough to tell which facilities are the ones to steer injured workers away from, and it's even tougher to convince the treating physician to make a change.

Fortunately, some providers in California have decided it's time to fess up, providing payers not only their names, but clear evidence on why they shouldn't be treating work comp patients.

The list, available here (thanks to WorkCompCentral for the head's up), identifies the hospital outpatient and ambulatory surgery centers that have opted to be paid as 'outliers'. That is, these facilities don't want to be paid based on the fee schedule's standard 1.22 times the Medicare rate on all cases. Instead, they have notified payers that they are to be paid 1.20 times the Medicare rate on all cases plus an additional payment for specific outlier cases.

Fortunately, there aren't that many providers on the list - probably less than fifty.

Even more fortunate, the good folks at California's Division of Workers Comp have published each facility's cost-to-charge ratio. Simply put, this is a comparison of what it costs the facility to deliver the service to what it charges payers for that service (on average). So, the lower the cost to charge ratio, the higher the charge in relation to what it actually costs to deliver the care.

There are some rather stunning revelations on the thankfully-brief list of 'outliers'.

For example. The Long Beach Pain Center Medical Clinic, Inc. has a cost to charge ratio of .20. That means they charge payers five times what it costs to deliver the service. And they aren't the...most ambitious.

There are seven (7) providers that charge more than five times costs, with two charging more than nine times costs. (Midway Hospital Medical Center and John F. Kennedy Memorial)

More information

This isn't the only resource for payers trying to find out which providers charge 'reasonably' and which ones less so. For more background, CDC is an excellent resource with lots of information written in laymen's terms; they also publish the average state cost to charge data here.

Our friends at HHS publish a variety of reports that help payers determine provider efficiency, here's one for inpatient admissions (covers all states and all providers). Many states publish similar data; here's Kentucky's,

Before I get flamed by providers telling me how their costs charges are justified because they only treat really sick patients or the cost evaluation isn't fair or their treatment is just soooo much better, I'll freely admit that cost is only part of the cost-benefit equation, and reasonable folks would argue it's unfair to look at one without the other.

True. And as soon as these providers show exactly why they're worth the added cost, we'll consider their evidence.

Posted by at 6:26 AM | Permalink | Comments (6)

Many readers are undoubtedly getting ready for next week's annual Risk Insurance and Management Society annual meeting, held this year (conveniently enough) in Boston.

For most, 'preparing' means buying gel insoles, making sure the extra-think padding has been ordered for the booth, confirming appointments and hoping the notoriously changeable Boston weather doesn't bring snow sleet freezing rain or all of the above.

Beyond the obvious, here's a few things to look for at the annual confab.

1. The new thing. A few years ago it was pharmacy benefit management, back in 2002 it was emergency preparedness, a couple years back data mining was big. As to what's going to be the buzz of the show, it's anyone's guess. It most likely won't be a big transaction or venture; the Sedgwick deal is public, the Bunch sale is in limbo, and a couple others aren't ready for public display just yet. Product launch? It will have to be a BIG deal. New customer? Again, it best be BIG to be 'the' thing.

2. Excitement, or at least a pulse, among the TPAs. This is admittedly hyperbole, but after the last few years, it's a bit surprising there are any TPAs left. There are some indications the TPA business is picking up; reports are that more currently-insured, larger employers are looking intently at self-insurance. This is anecdotal, but encouraging nonetheless.

3. New network offerings. Healthcare Solutions (formerly Cypress Care and Procura) are reportedly making significant inroads in the payer market, offering access to the Aetna WC and MagnaCare networks and generating lots of interest among payers. Expect that their competitors will also be announcing expansions, multiple network offerings, and carve-out products to meet a growing demand for 'non-me-too' provider networks.

4. Investor interest is high. Expect to see even more venture capital folks/private equity investors/bankers on the floor, at the bar, and dining out this year than in the past. Interest appears to be pretty significant in work comp in specific and claims/P&C in general, as the smart people who work for investment firms continue to try to figure out why this business is so...backward? Inefficient?

5. Potential employees. I've always advised clients searching for sales talent to go to the shows, walk around later in the day/week, and find the booth staffers that are not sitting down, thumbs flying over their blackberries, yawning away, but on their feet, asking questions, listening hard, and doing their best to ignore their boredom and sore feet and backs and represent their company, and themselves, professionally.

See you there.

Posted by at 12:12 PM | Permalink

Yesterday's announcement that Sedgwick, the giant TPA, is about to be sold marks the end of a months-long process that has implications well beyond the sale of one company.

For starters, it's good news for the TPA industry. Well, sort of.

The financials of the transaction are undoubtedly welcomed by the sellers, and on a broader scale, a positive sign for a work comp TPA industry that has been hammered by a long soft market and deep recession that has dramatically reduced claim volume. (TPAs typically are paid on a per-claim basis so fewer claims = lower revenues). The deal is a complex one, as Sedgwick has been owned by a consortium of several entities, and is being sold to another group of buyers. Primary owner Fidelity National will book $95 million in profit on the deal, and other owners, which includes health plan giant United HealthGroup, will likely enjoy similar gains.

The multiple looks to be about 5x earnings, which seems pretty solid given the industry (P&C claims and related services) although low compared to other recent deals (OneCall Medical, Fairpay Solutions). However, the OCM and FPS deals were fundamentally different transactions so comparisons aren't appropriate. Sedgwick had almost $700 million in revenue back in 2008 and just a tad higher last year. My guess is that number will increase rather dramatically for 2010, largely due to new business and more revenue from existing customers.

And therein lies the tale.

There are two other realities that bear consideration. Both appear related to the sale process and the company's operations going forward.

Some months, perhaps a year ago, word began to circulate among managed care vendors that Sedgwick was asking vendors to pay fees or commissions to the TPA if they wanted to provide services to Sedgwick clients. This practice is quite common in the comp world and if anything has become more prevalent of late as TPAs, hard-pressed by the soft market and declining claims fees, have looked high and low for other sources of revenue.

The issue lies in disclosure. As long as the TPA's customers are aware of and agree to the arrangement it's all good. Without clear and complete disclosure of the entirety of the financial relationship between the TPA and managed care (and other) service providers, customers may be unaware of the true 'cost' of their program and the reasons behind the selection of specific vendors. I don't pretend to know the details of Sedgwick's financial arrangements with each customer; I would expect Sedgwick has disclosed the nature and extent of these relationships to affected customers.

More recently, Sedgwick has brought on several new, very large customers, making it one of the rare claims organizations that has actually grown significantly. Word from several sources is Sedgwick's sales approach has been, in a word, aggressive, especially in the area of price. With admin fees already close to an all-time low due to market pressures, Sedgwick's uber-aggressive pricing is, according to several competitors, well under break-even. (this goes beyond complaints by disgruntled/frustrated competitors; these reports are from people who have been around long enough to be well past whining about lost business)

The implications are simple - did Sedgwick 'buy' business, or has it developed a more efficient, profitable model that enables it to under-price the competition while delivering service levels that are equal to those offered by the competition.

Regardless, TPA pricing and margins are not going to recover anytime soon. Therefore I'll take back my opening statement; this will mean more adverse winds for TPA operators.

What does this mean for you?

My bet is the new owners, primarily private equity firms, are looking for Sedgwick to continue growing; they have a heavy debt burden (more than half of the deal is debt-financed).

Look for Sedgwick to be just-as-if-not-more competitive in the market tomorrow then it has been for the last six months.

Posted by at 6:58 AM | Permalink | Comments (1)

Noted work comp attorney Jon Gelman has an excellent post on one of the heretofore lesser known provisions of the Health Reform bill - the 'Libby Care' amendment. A quick read may lead some to think that the Feds are just about ready to take over handling of occupational diseases.

The provision Gelman is referring to is in Section 10323, Medicare Coverage for Individuals Exposed to Environmental Health Hazards, 2009 Cong US HR 3590, [this takes you to the entire bill and is a long download, the relevant Amendment is on page 111th Congress, 1st Session (December 31, 2009).

A more careful read produces a somewhat different conclusion; this looks to be a one-time fix to a specific 'problem'. That's not to say that the work comp industry has done a good, or even passable, job in addressing occupational disease, but the Libby Care Amendment isn't an attempt to Federalize management and treatment of occupational disease. Color me a cynic if you will, but my sense is the Manager's Amendment isn't so much the 'camel's nose under the tent' as a political move by Sen Baucus (D MT) to curry favor and win votes; the Amendment is specific to an environmental disaster in Libby, Montana.

Here's why.

1. The Amendment requires a site be designated a "Public Health Emergency" by the Secretary of HHS. To date, Libby is the only site so designated.

2. The provision covers care for all affected residents and employees, not just workers. This is clearly far beyond 'occupational' and is much more of a public health issue than a work comp one.

3. Care is to be delivered through the Medicare system. This will require allocation of additional funding for each new site, something a cash-strapped CMS is unlikely to encourage.

I'd encourage readers to review Gelman's piece in its entirety; Jon knows of what he writes and has done a credible job in identifying and analyzing this important issue.

What does this mean for you?

Likely increased attention for occupational disease, and over time, a push by CMS to ensure those responsible pay for the associated cost.

Posted by at 6:44 AM | Permalink

Health Affairs' most recent edition includes a piece [sub req] on the changing health care landscape in California, one that now has hospitals occupying the high ground. The historical background is telling;

too many hospitals to begin led to tough bargaining by insurers,

which dramatically reduced hospital revenues and profits,

followed by consolidation, hospital closings, and reduction in capacity,

leading to a shift in market power as insurers, needing coverage in key areas,

were forced to agree to ever-higher rates,

pushing hospital costs, revenues, and profits back up.

Here are a couple excerpts from the article.

"In current health reform discussions and proposed legislation, providers' growing market power to negotiate higher payment rates from private insurers [emphasis added] is the "elephant in the room" that is rarely mentioned. Here, in our study of the current negotiating environment in California, we explain that growing market power for providers caused a shift that gave providers a stronger bargaining position [emphasis added] over health plans, leading in turn to higher insurance premiums...

A recent study has shown that in California, after a downward trend in hospital prices for private-pay patients in the 1990s, a rapid upward trend began about 1999 that produced average annual increases of 10.6 percent over the period 1999-2005 [emphasis added]. The study's authors concluded that the source of the near-doubling of California hospital prices remains "something of a mystery."5

Analysis of Medicare Cost Report data by the Medicare Payment Advisory Commission (MedPAC), although national, shows that inpatient costs per admission increased only 5.5 percent per year during that period."

The net is this - hospitals' market power enabled them to raise prices by 10.6% while their costs only went up about half that fast.

This is meaningful on many levels.

1. If you operate in California, your facility costs are trending higher quickly.

2. Reimbursement is but one part of the contracting process; hospitals will, and are, using their leverage to squeeze other concessions out of payers, including faster bill payment, reductions in the UR burden, and speedy resolution of disputes.

3. California is leading a trend that will be felt in many other states, and soon.

4. Those payers with the 'loosest' contracts, particularly those based on a percentage off charges, are going to get hammered. And those with contracts that are only slightly better are no better off.

I'd add that the article also addresses the growing power of larger physician groups, whose negotiating leverage is evolving along similar lines. More on that in a future post.

What does this mean for you?

Big health plans are at the mercy of hospitals, so costs are going to go up. For workers comp payers, the picture is even worse. Your best bet is to keep injured workers out of hospitals.

Then again, you can always just raise rates...

Posted by at 7:30 AM | Permalink | Comments (3)

I've long held that broad-based attempts to control the price of medical service are, at best, a short term fix, and at worst, a blunt instrument that actually encourages over-treatment and extended disability.

Greg Krohm, Executive Director of IAIABC, has a similar take. Speaking for himself and not in his IAIABC role, Greg notes:

"payment rules like fee schedules are devoid of financial incentives for good medicine and good treatment outcomes, [emphasis added] including early return to work...I can think of no reason for a clinician - other than professional & moral values - to put in the extra time it takes to counsel and manage patients on tricky issues like return to work, pain management, therapeutic programs, and the prevention of re-injury. The payment is a flat rate per billing code without regard to quality or care given."

Greg is, or course, dead on. His column is well worth a read and re-read, as he delves into several related issues. But for now, let me focus on just the price issue.

Fee schedules attempt to control cost by controlling just one aspect of the medical cost equation - which is:

Price x utilization (number of services used) x frequency (percentage of claims that use that type of service) = cost.

Some services - MRIs. for example, are indeed more a price than a utilization problem (not that there isn't over-utilization of imaging, but price is a more important driver), so focusing on price per service makes sense. Hospital and facility fees are another service type that are primarily a price-per-service issue.

Physical therapy is much more of a utilization problem; the price per service is relatively low, but the number of services tends to be quite high, and many payers struggle to control utilization.

Even if price is the issue, attacking price alone without paying attention to utilization and frequency is akin to plugging one of three holes in a dam; the water will just seek out the other gaps, enlarge them, and before you know it the flood is even worse.

That's but one aspect of the issue; we haven't even touched on how low fee schedules disincent provider participation in workers comp thereby reducing access to care, or the inability of the regulatory process to keep pace with medical innovation, or bill review vendors charging some payers merely to reduce provider bills to an inordinately-low fee schedule.

WorkCompCentral's Greg Griggs has written an excellent piece on this issue; [sub req]Griggs interviewed a couple folks who disagree with Greg Krohm's views.

What does this mean for you?

Price controls. and artificially low prices, don't reduce total costs.

Posted by at 8:10 AM | Permalink | Comments (2)

CompPharma LLC, a consortium of workers comp PBMs, has just published a glossary of terms commonly used in the comp pharmacy business, the press release is here and the glossary, which entitled CompPharmaPedia, is here.

Why a glossary?

Several reasons.

Regulators and legislators are working feverishly to figure out what they will use as a basis for their pharmacy fee schedules when AWP is no longer published by First DataBank. While they are working on fees, they may well want to tweak other provisions of the comp code; CompPharmaPedia can help provide a standard definition of terms so stakeholders have a consistent understanding of what, for example, a 'claim' is.

(in comp, a claim is the injury and all the activity surrounding that activity; in group and governmental programs a claim is the bill for a specific medical procedure(s) or prescription or service)

Many payers are looking to improve the results of their pharmacy programs, and there's a good deal of confusion out there as different PBMs use different definitions in their reports and marketing literature. CompPharmaPedia is an attempt at standardization, so payers can do the proverbial "apples to apples" comparison.

Researchers are looking deeper into comp pharmacy, and CompPharmaPedia should help them use standardized terms to improve understanding across the entire community.

A couple of disclaimers.

CompPharmaPedia is a service; there is no 'requirement' that PBMs, or anyone else, use the definitions. PBMs may and some likely will continue to use their own definitions.

CompPharmaPedia is also a work-in-progress, and will evolve as the comp pharmacy business does. Expect more terms to be added and current definitions to be 'tweaked'.

(Note - CompPharma is owned by myself and Helen Knight.)

Posted by at 7:13 AM | Permalink

Stratacare's (relatively) new owners are delivering on their commitment to growing the company; they will be acquiring Marsh's CS STARS MedBillPro operation.

Paul Glover et al (Stratacare leadership) has been aggressively on the hunt for new business; they were finalists in the now-defunct Bunch and Associates deal, and looked hard at OneCall Medical and at least one other deal. Expect to see more from Stratacare in the future; the RIMS Conference is coming up at the end of April, an event where new deals are often announced.

The announcement is here.

What does this mean for you?

Activity generates interest in the investment community...

Posted by at 8:57 AM | Permalink

I was interviewed by CompTalk Radio's Bob Wilson a few days ago on the subject of the direct - and indirect - effects of health reform on workers comp.

The interview is here.

Posted by at 1:50 PM | Permalink

I've commented at length on the impact of health reform on workers comp, and will dive deeper into this topic in the coming months. There are several others who also are looking into reform, and their different opinions are well worth considering.

Greg Krohm, Executive Director has posted his views on the topic recently; as the head of the association of workers comp regulators, Greg has a unique perspective enhanced by deep knowledge of the intricacies of work comp regulation and operation in every jurisdiction.

Greg makes several interesting points:

- pharma costs may continue to rise due to increased demand for drugs

- the increased demand for physician services, particularly in rural areas, may lead to extended delays in getting initial treatment, especially in states with low fee schedules and high administrative loads. This is a trenchant observation, and one I'm going to have to think about as it relates to provider networks.

- with lower state budgets due to the significant expansion of Medicaid leading to possible continued reductions in staff at regulatory agencies, disputes will take longer to settle, rulings longer to be handed down, and clarifications on rules and laws delayed.

Greg's observations are well worth considering.

What does this mean for you?

The impact of reform will play out over several years; knowing what may come will help you recognize the early signs and prepare for change.

Posted by at 7:25 AM | Permalink | Comments (1)

In the five and a half years I've been publishing this blog, I've never had a guest post. Today's post breaks that tradition. (This is NOT a change in policy; please don't submit guest posts)

Good friend and colleague Peter Rousmaniere is one of the most thoughtful and interested observers of all things related to workers comp; his work appears in many other publications including Risk and Insurance. Peter and I were discussing the issue of the federal government's role in work comp, he mentioned the history of federal involvement in occupational disease, and was kind enough to agree to write up his thoughts on the issue. I don't necessarily agree with Peter's perspective, but his views are well worth consideration.

Here's Peter's view.

There is talk about the threat of complete federalization of the workers compensation system without any evidence that the Administration and Congress is giving the idea any thought. However I envision a scenario for a serious effort in the next few years to take over coverage of work-related diseases. I have four points to make.

First, there is a very apt precedent of a federal takeover of about ten years ago. Thousands of nuclear weapon workers employed from the 1940s through the 1970s at private companies contracted by the federal government filed disease claims in state systems. Hardly any were accepted, an indication less of the merits of the claims than of the torturous, glacial pace of disease claims in virtually all state workers compensation systems.

After decades of inaction at the state level, Congress in 2001, in a bipartisan way, and with tacit concurrence by the states, said that the federal government was assuming the task of managing these claims. Thus emerged the Energy Employee Occupational Illness Compensation Program. The Department of Labor has spent several billions of federal tax dollars paying disease claims that were not paid through the workers compensation system.

Second, there is some interesting evidence that most occupational diseases do not enter into the state workers compensation systems. These ill workers go without the protections provided by these systems. The Massachusetts Department of Public Health studied asbestosis-related hospitalizations between 1996 and 2000 and found that among 3,344 hospitalizations, only 15 were paid for by workers compensation insurers.

Using epidemiological methods, and after analyzing state records of disease claims, other researchers estimated that the large majority of disease claims were missed. They went on to estimate that the annual national medical spend outside the workers compensation system for occupational diseases is between $8 and $23 billion.

Third, if the Democrats maintain their control of Congress in November, they are very likely to return to massaging the issue of OSHA undercounts. Congress could well extend its scope to investigate any kind of systemic barrier to protection of workers from the incidence and effects of occupational injury and disease. Congress will have not problem filling a conference room with claimant bar attorneys and medical reseachers.

Fourth, threats of federal takeover actually work. At the time the Nixon Administration created OSHA, it also launched a National Commission on State Workmen's Compensation Laws. The commission's report of 1972 is credited with embarrassing and prodding many states to modernize their workers' compensation systems.

Posted by at 6:57 AM | Permalink | Comments (1)

Today's employment report contains a bit more of the good news workers comp have been hoping for: an increase in manufacturing employment and continued overall growth in industrial production. Overall, the economy generated 190 thousand jobs in March, the highest rate of job creation in three years.

according to Marketwatch,

"Manufacturing payrolls increased by 17,000. Construction employment rose by 15,000. Manufacturing hours increased by half an hour to 41 hours per week, with 3.7 hours of overtime on average."

The net is positive - more jobs, longer hours, more overtime.

A decline in construction spending tempered the positive employment news, but that could have been significantly affected by the lousy weather experienced by much of the country in February.

The investment income picture isn't quite as encouraging, with returns for the P&C industry down sharply in 2009 over the prior year, That's somewhat offset by the jump in the equity markets over the last year. While higher returns would be nice, the silver lining is comp insurers aren't able to keep premiums low by generating significant investment income, forcing underwriters to price to risk rather than bank on high investment returns covering claims costs.

There are some indications that carriers are beginning to strengthen pricing in selected markets and products. That's not to say the market is turning, but the bottom may be near.

What does this mean for you?

As employment picks up in manufacturing and the spring brings increased construction activity, claims counts and frequency are also likely to rise. While bad news for the injured, this will be good news for occ medicine clinics, managed care and bill review firms, PBMs, and, most of all, TPAs.

Posted by at 6:57 AM | Permalink | Comments (2)

There are some folks in the greater 'workers comp' world who are speculating that the 'Feds' are going to take over workers comp, or words to that effect.

This is idle speculation based on connecting unconnectable dots, reading unreadable tea leaves, seeing patterns where no patterns exist, some of it on the LinkedIn Workers Comp Forum group founded by Mark Walls (this is in no way a criticism of Mark; the Forum is an open discussion group where anyone can participate).

For the umpteenth time, there is NO interest on Capitol Hill in workers comp. And CMS can't 'take over workers comp' without passage of a bill by Congress As I said last summer:

"we all know that comp was originally part of the Clinton reform package, known as Title Ten. What you may not know (and I didn't until Bob Laszewski told me) is exactly one (1) person in DC wanted Title Ten. Bill Clinton. No one else, not Ira Magaziner or Jay Rockefeller or Hillary gave two hoots about WC, but the big dog did.

What is also little known is that the person who deleted Title Ten was none other than Ted Kennedy. And the Senator has not had a change of heart.

Could this change? No.

As Sen. Ron Wyden told me several months ago, when it comes to health reform, no one wants to pick a fight with anyone they don't have to."

To those who are engaging in this idle speculation, I ask why do you think anyone in Congress has any interest at all in taking on workers comp?

And if they did, which they don't, where exactly would this fit on the priority list? Above the education reform bill? Just below immigration reform? Senior to the budget bill, or not? more, or less, important than the nuclear non-proliferation treaty? somewhat less significant than the Israeli West Bank settlement issue, or more? more critical than the energy bill, or no? If Congressman X has to spend time thinking about comp, or Afghanistan, or the Iraqi election, or Iran, or China's refusal to adjust its currency valuation, or bank regulation, what do you think he will do?

As to any interest at CMS in taking over WC, wouldn't you think they have enough to do what with expanding Medicaid by a third, revising hospital reimbursement, drastically changing physician compensation, completely redo-ing Part D, developing and implementing over a dozen pilots and trial programs, and revamping Medicare Advantage?

Get real, people. Workers comp is a tiny, all-but-insignificant industry that accounts for less than two percent of total US medical spend. Hell, workers comp amounts to only 11% of the P&C industry, and no one's talking about nationalizing airplane hull insurance, or fire insurance, or GL or auto or...

What does this mean for you?

Anyone who thinks anyone inside the Beltway spends more than two seconds a year thinking about workers comp is not thinking.

To join Mark's Forum, click here.

Posted by at 1:04 AM | Permalink | Comments (3)

Let's take a quick break from the 'reform impact on work comp' to return for a brief moment to North Dakota. You'll recall when last we visited NoDak, we were wondering why the state Supreme Court had yet to issue a ruling in Sandy Blunt's year-and-counting appeal.

Things have gotten even more interesting in the last few days.

Cynthia Feland, the Burleigh County Assistant State's Attorney in charge of the state's case against former WSI CEO Sandy Blunt, is starting to understand what it feels like to be on the other side of the table.

Sources in North Dakota indicated late last week that Feland is not only under investigation by the City of Bismarck's police department for potential prosecutorial misconduct, but the state Bar Association has also determined Feland's actions during the Blunt trial merit investigation.

(To which snarky bloggers might say "really? You don't say!".)

Bill Kidd at WorkCompCentral reported:

Bismark Police Chief Keith Witt confirmed Thursday that his department is investigating a complaint lodged against the Burleigh County State's Attorney's Office by Steve Cates, a Bismarck news blogger and supporter of Blunt. Witt said the investigation is "really preliminary at this point."...A statement released at a March 9 "informational conference" by Bismarck Police Department Sergeant Mark Buschena said that Cates reported "he believes that the prosecutors of the Burleigh County State's Attorney's Office committed criminal violations in the prosecution of Charles (Sandy) Blunt which occurred in 2008."

"He (Cates) also alleges that a prosecution witness committed perjury during trial and was involved in a conspiracy with the State's Attorney's Office concerning the prosecution," the statement said.

The statement reported the "offenses named" were criminal conspiracy, perjury, false statement and misapplication of entrusted property during the period from Nov. 3, 2008, through Dec. 19, 2008."

This may cause Feland a bit of difficulty in her campaign for district judge. That is, if the media in North Dakota sees fit to actually report the investigations, and, when they conclude, the results thereof. For some reason the media has yet to pay much attention to the charges faced by Feland...

Meanwhile, the State Supreme Court is still sitting on Blunt's appeal, using their time to reach decisions on over a dozen cases filed - and heard - after Blunt's.

Here's hoping the State Supreme Court renders a judgment soon and the investigation of Feland moves quickly. Blunt has twisted in the wind long enough and it's time for Feland to be brought to justice.

Posted by at 7:20 AM | Permalink

Loyal readers, return with us once again to the wilds of North Dakota, that ice-bound region where executives are criminalized for signing off on cookies and balloons at farewell parties, where out-of-control prosecutors deny defendants their constitutional rights, where a boss not from NoDak is pilloried despite turning around a troubled state agency.

Yes, the Sandy Blunt case has reached a new peak of incomprehensibility. Here's the latest.

Blunt appealed his conviction to the State Supreme Court a year ago, and the case was argued five months ago. One would think that would be plenty of time for the judges to issue a ruling. After all, the Court issued seven opinions so far this year for cases argued in 2010 - two months after Blunt's hearing.

And while logical minds would think that speedy justice, a right of all citizens conferred in the US Constitution would apply in the frozen north, apparently that is not the case. (See below for the requirements of other courts in North Dakota)

In fact, of the twelve opinions rendered by the North Dakota Supreme Court, not one was argued before Blunt's - all were argued a month or more after his, yet the Court has not seen fit to issue a ruling in Blunt's case.

Which leads to the next fascinating bit of NoDak current events.

Reports indicate the attorney who prosecuted Blunt is under investigation by the State Police for potential crimes including conspiracy. What makes this so interesting is that no other media outlet reported this until well after Steve Cates did in his "Dakota Beacon'.

Wait, it gets weirder.

On the day that the State Police announced the investigation into the Assistant State's Attorney who prosecuted Blunt (Cynthia Feland), there were two other stories that actually did make the news. One would think that they must be big, if they took precedence over an investigation into potential crimes by a Prosecutor. Perhaps a bust of a huge crystal meth lab? Reports of Al Qaeda coming across the border from Canada?

Nope.

Two men, described in the media as "Native Americans" (gotta love that unbiased media...) were caught on video breaking a liquor store window and stealing fifty bucks worth of booze.

Let's see...I'm the producer of local TV news, got two minutes to fill on the crime blotter...fifty bucks in booze, about four bottles perhaps, against allegations of criminal actions by a county prosecutor...hmmmm, seems like a pretty clear editorial decision to me - let's slam the Native Americans! Who cares about a law enforcement official accused of conspiracy and suborning justice!

This would actually be pretty funny, even hilarious, if it wasn't about a prosecutor who allegedly committed crimes in the course of prosecuting one of the most decent, honest, and competent executives I've had the honor of meeting in my 25 plus years in the business world.

(Here's the relevant language from North Dakota's Judiciary)
Section 1. Statement of Policy.

a. A goal of the judicial system of North Dakota is prompt disposition of cases.

b. The Supreme Court recognizes the need to provide administrative mechanisms within the unified judicial system to maintain current trial court dockets. These trial court docket currency standards and procedures are established to meet this administrative goal.

c. These standards guide the management of the trial courts of North Dakota. However, these court management standards and procedures are not intended and may not form the basis to change or affect the substantive and procedural rights of the parties in any case. Further, a violation of these standards does not cause the dismissal of any case.

d. Adherence to these standards by trial judges requires lawyers to recognize consequent adjustments in local practice. Members of the bar should anticipate the prompt disposition of cases.

Posted by at 7:26 AM | Permalink | Comments (5)

Yesterday's news that US industrial production continued to improve was a welcome sign of good news for a work comp industry that has been hammered by declining claims frequency, increased severity, horrible investment returns, and a recession that prolonged what was already one of the longer soft markets in memory.

Notably, manufacturing, long a weakening sector, has shown solid strength of late, particularly in New York, where new orders were up substantially over February's figures. Employment in the sector was also up significantly to its highest point in two years.

As NCCI has reported, injury rates tend to spike up during an economic recovery as the pace of work speeds up, full-time workers get more hours and overtime, and new, less-experienced workers are hired.

What to watch for

The New York Fed typically is among the quickest of the 12 Federal Reserve Districts to report economic data; other Districts will be reporting over the next few days. As New York, along with the rest of the mid-Atlantic and northeastern states were hard hit by winter storms, economic activity may well have been suppressed by factory closings.

The other Districts may well report sharper increases, and if they do that's good news for the comp business.

What does this mean for you?

Injury rates are going to increase, as is the raw number of injuries. While bad news for the affected parties, this will be positive for occ health clinics, case management and bill review companies, pharmacy benefit managers, TPAs, and other servicing entities.

Insurers will find this a mixed bag, as an increase in injuries means higher claims costs. However, better investment returns, and what appears to be a 'de-softening' of the comp insurance market is as welcome as it is overdue.

Posted by at 7:17 AM | Permalink

Medicare Set-Asides are one of those narrow but very deep niches in the workers comp (and other insurance lines) business that look simple at first glance, but are anything but.

The Federal government, more specifically the Center for Medicare and Medicaid Services (CMS) requires payers to submit MSAs for claims that meet specific requirements.

There's been a good deal of confusion about reporting requirements, controversy over how to estimate future drug costs, concern over delays in processing MSAs by CMS vendors, and disputes over the vendors' judgments. A lot of this is inevitable, as MSAs are a fairly recent phenomena governed by CMS' myriad and sundry rules. But inevitable or not, the confusion and lack of clarity on deadlines, reporting and funding requirements and submission standards are causing significant problems for all involved.

There are currently two efforts to resolve much of the confusion and concern. WorkCompCentral reports a bill has been submitted to the House that addresses many payer (and CMS) issues. According to Safeway Risk Manager Bill Zachry;

"The bill was developed by the Medicare Advisory Recovery Coalition (MARC) to focus primarily on liability issues, but a number of the provisions will also affect insurance carriers and self-insured employers with respect to conditional payments and reporting of workers' compensation payments and obligations.

The primary features of the proposed bill include:

1. Providing a specific time frame and process to be used in
determining MSP required payments before settlements
2. A right of appeal for Non-Group Health Plans with respect to MSP
obligations
3. Sensible MSP Recovery Thresholds
4. Taking Social Security Numbers (SSN) and Health Insurance Card
Numbers (HICN) Out of the Reporting Process
5. Setting a Statute of Limitation for MSP claims
6. Establishing safe harbors and clarity with respect to MMSEA §111
reporting penalties
7. Establishing a modest user fee designed to assure that the reforms
in the bill do not raise cost issues in the scoring of the bill."

There are also indications that CMS is listening to vendor complaints, as it has recently extended the deadline for electronic submission to the end of this year. CMS is also looking for vendors to process the MSA submissions, and is asking interested parties to bid on the contract.

Click here for more details or if you're looking to support MARC's efforts,

Posted by at 6:44 AM | Permalink

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 at 6:47 AM | Permalink | Comments (1)

In the very narrow world of work comp managed care, there's an even skinnier slice focused on managing pharmacy. As pharma accounts for almost a fifth of all medical dollars spent in comp, its an area that certainly deserves attention - from employers, insurers, legislators and regulators.

There's a lot going on in work comp pharmacy:

- the basis for fee schedules in 33 of the 34 states with fee schedules for comp will change within a year;

- the use of potent and potentially addictive narcotic opioids is rapidly increasing;

- price increases on brand drugs has raised the price per pill rather dramatically; and

- drug testing and the use of opioid contracts are gaining traction.

Interestingly, there's only one state that currently has a somewhat restricted formulary in place - Washington, which actually prohibits the use of several controversial drugs for work comp claimants.

Texas has been working on a 'closed' formulary for a couple of years now, and has made significant progress. Basing their list of drugs on the ODG guidelines, Texas will be the first non-monopolistic state to require payers' authorization of a number of drugs before they can be dispensed.

While the review and regulatory drafting process has taken a while, involved many parties, and required many meetings, sources indicate it is getting close to completion. The length of time it takes to get this done is not surprising, as this is new ground for regulators, payers, and clinical personnel as well.

The formulary will allow most drugs commonly used in work comp to be dispensed without any prior authorization (PA) or review (just as they are today) but a relatively few drugs will have to be specifically authorized by the payer. Among the drugs requiring a PA is my old favorite Actiq(r), a very, very expensive, very potent narcotic lollipop that is only FDA approved for breakthrough cancer pain for patients already using a narcotic opioid.

I've locked horns with the good folk from Texas' DWC in the past over their managed care reporting methodologies; I'd be remiss if I didn't applaud their efforts to address one of the most significant problems in workers comp - the inappropriate use of expensive drugs.

It isn't just the cost of the pill that's the issue. Patients taking narcotic opioids for extended periods are at high risk for addiction; are severely limited in their ability to return to work; and often suffer from significant and highly problematic side effects (depression, constipation, erectile dysfunction are just a few).

This is one of those issues that isn't easy to address. Managing pain can be highly controversial, is a very patient-specific and not-well-understood aspect of medicine, and often puts physicians in a difficult position. If they don't treat the pain as the patient desires they may be subject to sanction, but if they overtreat they may harm the patient or contribute to abuse or diversion.

Adoption of state-approved prescription medication guidelines will go a long way to helping resolve these issues, and kudos to Texas' DWC for the thoughtful, careful way they're going about it.

Posted by at 7:20 AM | Permalink | Comments (4)

Yesterday I said

"Kudos to Worker Comp Exec, they were the first" to get the notice out about Fairfax' purchase of work comp insurer Zenith for $1.4 billion.

I should have said Work Comp Exec was the first to send the notice to
me, as WorkCompCentral posted their news a bit earlier on their site.

Yesterday's post appears below; first the analysis.

Good move by Fairfax. Zenith is one of those rare WC insurers; it doesn't follow the suicidal market cycles, buying business in the soft market and running for the hills when the market hardens. CEO Stanley Zax has built a solid management team and the addition of Janet Frank (sources say she was aware of the deal and will assume the presidency of Zenith) adds additional strength.

So why now?

My take is Fairfax recognizized the market is about to turn, and decided to buy now before the stock price went up. They don't want companies in turnaround mode as Fairfax 'buys and leaves alone'. And if the market turns by the end of this year (as I've been predicting) they wouldn't have time to fix a broken insurer. Fairfax wanted to expand their footprint with an insurer well-positioned to benefit from a hardening market, and Zenith fits that need quite well.

This represents a premium of about 30% over the current stock price, welcome news for any and all Zenith shareholders. The market appears to believe the deal, scheduled to close in the second quarter, will get done as Zenith is currently trading just shy of the stated purchase price.

Zenith will reportedly continue to operate independently; this isn't a surprise nor is it one of those "yeah, sure, until the dust settles' proclamations as Fairfax tends to allow its subs, which include Crum and Forster and Odyssey Re, to chart their own course.

Posted by at 7:00 AM | Permalink | Comments (1)

Pretty well.

With the demise of health reform and the company's continued focus on core businesses at the expense of ancillary or unrelated operations, things are looking up for the mid-tier managed care company. Last week's Q4 2009 earnings call revealed a number of positive results while acknowledging significant 'headwinds' exist in the health plan business.

Since CEO/Chair Allen Wise resumed leadership of Coventry over a year ago, he's done a creditable job turning things around despite a tough business environment. While there's still a lot left to do, Coventry is clearly back on track, despite projecting commercial medical trend of 8.5% - 9% for 2010.

Wise et al dumped the Medicare fee for service business last year along with First Health Priority Services [note FHPS is NOT the workers comp bill review/network/case management business], moves that removed burdens while adding to the overall company's profitability. There were a number of management changes as well, particularly in regional health plans and sales, that appear to be bearing fruit.

Coventry, like most other health plans, is facing declining enrollment. With employment numbers still troublesome, they are going to lose membership on the commercial sector side but will continue to raise prices to ensure profits grow.

One of the more encouraging statements in the call was from Wise, and pertained to medical management (an area long neglected by Coventry):

"we must do a better job in managing our members' product care needs. And to that end, we've embarked on several initiatives and put considerable resources to improve this area. It's difficult to do, but we understand that providing better care and more cost-effective care for our members is basic to stay in this business."

Although this was specific to the Medicare Coordinated Care business, it is one of the first indications that Coventry is working to move from a company solely focused on risk selection and price arbitrage to one that is at least thinking about medical management.

Workers comp

Many MCM readers are interested in Coventry's work comp operations, so here's a few items of potential import.

First, Wise said:

"Some comments on our remaining businesses, which is our fee-based businesses. And that's our workers' compensation services, our rental network, and the federal, the FEHB business, which are all stable with improving results, well-positioned and produce a diversified revenue, earnings and cash flow stream while capitalizing on our core managed care capabilities. During 2009, we spent time addressing the administrative cost structure for these areas and improvement will continue during 2010."

Coventry cut a lot of overhead in the WC unit in 2009 and earlier this year, and word is more reductions are on the way.

Second, and more obtuse, was a discussion about hospital unit costs and their impact on trend (which was described as 'high single digits'). Coventry personnel described their efforts to recontract with hospitals to address trend, particularly as it effected Medicare costs. Not sure how or if this affects work comp, but some of Coventry's work comp customers have been seeing significant increases in facility expenses.

Something to watch for.

What does this mean for you?

Watch your facility costs - particularly the price per service and volume of services, and especially for ER visits.

Posted by at 10:27 AM | Permalink | Comments (3)

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 at 8:08 AM | Permalink | Comments (2)

The light at the end of the tunnel is getting brighter - and closer.

Yesterday's jobs report contained good news for the economy and for the workers comp industry - unemployment dropped 0.3% to 9.7%, a rate that is still way too high, but better than last month's 10% and certainly headed in the right direction.

The details are even more encouraging - the first gains in manufacturing jobs in two and a half years (!) (+11,000) and a small uptick in hours worked per week.

The other good news is a sharp bump in temp workers (+52,000), and a huge drop in the "number of persons who worked part time for economic reasons (sometimes
referred to as involuntary part-time workers) fell from 9.2 to 8.3 million in January. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job." (source BLS)

This last statistic is telling; sometimes called the 'underemployment rate', the data indicated a result of 16.5 percent in January, a welcome improvement from December's 17.3 percent.

Construction and transportation continued to suffer, with both sectors seeing continued declines in employment. However, there are a number of significant projects funded by the American Reinvestment and Recovery Act, including a major nuclear site decommission on the Savannah River that will result in the hiring of up to 3000 workers.

There's also a report that new home construction in the Atlanta area is picking up, improving the fortunes of developers and laborers alike.

Hiring is slowly increasing, and the ever-so-slight uptick in manufacturing, the first in two and a half years, is hopefully a leading indicator.

When employment picks up, so does work comp premium, and inevitably claims. The good work by NCCI indicates the injury rate typically heads up at the end of a recession as employees are working longer hours and more overtime, the pace picks up, and less experienced workers are hired.

What does this mean for you?

Higher work comp premium volume, more injuries, and more work for managed care and claims organizations. I'd expect safety and loss control people to start getting more calls as well.

Posted by at 7:21 AM | Permalink

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 at 7:28 AM | Permalink

Coventry's work comp division has recently gone thru some changes at the upper management levels. The overhaul has affected clinical ops, senior management, and sales, and according to insiders may not yet be complete.

Chris Watson is now COO, moving up after a stint of less than a year as COO of Coventry's bil review operations (and a prior position as head of Coventry's First Script PBM business). Derrick Amato, formerly COO, Clinical Services in the company's New England offices) has moved out of Coventry, as has Peter Harn, who's accepted a position as VP Corporate Sales at PMSI in Tampa.

Yet to be announced is the departure of one more senior member of the sales staff, who will be heading to a top slot at a regional work comp managed care company. (this is one of the worst-kept secrets in the industry as I've heard it from no fewer than three sources this week).

UPDATE - The individual who departed, Tom Shivers, has been named EVP of Healthcare Solutions Inc., a comp and auto managed care firm owned by Brazos.

Finally, Pat Sullivan, the well-regarded former head of marketing for Coventry Work Comp, has left as well.

So, what does this mean?

'Big' Coventry is continuing to look to reduce overhead and increase profitability, a path clearly and bluntly laid out by CEO Allen Wise when he took over what was then a struggling company a year ago. I have no idea if these changes were part of a bigger plan, or just coincidental, although the departure of four senior staff certainly reduces overhead, probably by a million bucks all in.

Posted by at 11:21 AM | Permalink | Comments (4)

As industry insiders have known for almost a year, Average Wholesale Price as published by First DataBank, is going away. Triggered by a settlement in a lawsuit filed in Boston in 2006, as of March 2011 FDB will no longer publish their version of AWP. (There's a bit of disagreement as to timing, as one authoritative source indicates FDB is scheduled to discontinue the publishing of AWP in October 2011 (not March). I'll find out what I can find out)

Regardless, FDB's publication of AWP is going to cease. Sources indicate the National Association of Chain Drug Stores (NACDS) is suggesting a move to a new pricing methodology based on Wholesale Acquisition Cost, or WAC.

What's with WAC?

WAC is the manufacturer's list price for drug wholesalers and direct purchasers, excluding prompt pay or other discounts. (Note WAC may not bear much resemblance to the actual price paid, a problem it shares with AWP...)

NACDS and drug retailers would like to see a conversion to WAC; in fact NACDS has been advocating WAC for at least five years. WAC is generally accepted in broad swaths of the payer community; around ten states use WAC in their Medicaid pricing; the huge TriCare program is also WAC-based.

Here's a bit of history.

The original legal case rested on FDB's selection of McKesson as the sole source of drug pricing data. FDB's AWP was based on the actual price that McKesson paid for the drug, plus a margin. For years the typical margin was 20%; six years ago McKesson changed the margin to 25% to make it 'simpler to administer pricing internally'.

The price increase also earned McKesson points with its customers, retail pharmacies, who saw an immediate increase in profitability - profits on Lipitor immediately jumped three-fold after the 2002 increase. As part of the settlement in the 2006 case, FDB agreed to stop publishing prices two years after the finalization of the settlement (which is March of next year).

As cognoscenti are well aware, the suit has already had repercussions. On September 26, 2009, First DataBank and MediSpan, the firms that publish Average Wholesale Pricing tables changed their methodology to revert to the 20% margin, thereby reducing the drug's AWP cost by almost four percent.

Wait, it gets more complicated. FDB is not the only publisher of AWP, and AWP, as published by RedBook and MediSpan, may be around in some markets for a while. The case for the persistence of AWP is that it is broadly used today, and RedBook and Medispan have not been charged with the kind of pricing manipulation that led to the FDB settlement.

Conversely, for some time AWP has been disappearing in generic pricing, where it is being replaced by MAC (maximum allowable cost), FUL (Federal upper limit), and other methodologies that seem to provide a more objective and less fungible baseline.

There's another reason AWP may be on life support; it is broadly reviled as few payers believe, and with good reason, it has any real objective basis.

Implications for workers' comp

As I reported several months ago, work comp regulators are wrestling with the issue, as 33 states base their work comp fee schedule on AWP (California doesn't). Where they end up will be heavily influenced by the metric chosen by group/Medicare/Medicaid; drug spend in comp is about 2% of the nation's total bill of $220 billion.

Posted by at 7:25 AM | Permalink | Comments (1)

That's the question Sandy Blunt, former CEO of North Dakota's state workers comp fund must be asking himself.

Because the most serious charge against Blunt was based on Blunt authorizing sick leave for and not getting expenses repaid by an employee who was terminated. Turns out the North Dakota state auditor had reviewed the situation and given Blunt a pass, and reported as much to prosecutor Cynthia Feland well before she went to trial. In fact, these 'crimes' were what enabled Feland to increase the charges leveled against Blunt from misdemeanor to felony status.

Sure, the misdemeanor charges were ludicrous; authorizing the purchase of small gift cards, balloons, and food for employee meetings and celebrations, and a raft of other contrived accusations which together wouldn't amount to enough to give even the squeaky-cleanest among us any pause. In total, Blunt 'signed for' $2,693.15 over three years; all of it with the consent of the fund's legal and financial departments.

But this is an entirely different situation - this isn't just piling up a bunch of ridiculous charges in an effort to bring down a CEO, no, this is outright fraud on the part of the prosecutor.

This is a bit complicated, so stick with me here. The players are Cynthia Feland (prosecutor), Sandy Blunt (defendant), Jason Wahl (state auditor), Mr Spencer (ND state fund employee terminated by Blunt), and your faithful author (me).

Here's an excerpt from communications from Blunt's attorney and Feland's office discussing the memo (authored by Wahl) which stated Blunt's authorization of moving expenses and sick leave for Spencer, was not a violation of state law. First, from Blunt's attorney to the prosecutor:

(paraphrasing the first part) "the Wahl memo read, in part, "we determined, in consultation with a representative of the Attorney General's Office, there was not a voluntary resignation". In the context of the specific allegation of failure to recoup moving expenses of Mr. Spencer, this quoted language is virtually controlling in Mr. Blunt's favor. In the context of the entire case, its importance would have permeated virtually every aspect of the case, procedurally and substantively.

It is difficult for me to fathom the prosecutors in this case not knowing or not remembering the above quoted language of the memorandum when the decision was made in September, 2008, to add the allegation of failing to recoup the Spencer moving expenses to Count I in this case. How could the State believe that was a legitimate action in the face of the subject language in the memorandum? Rule 3.8(a), North Dakota Rules of Professional Conduct, provides, "The prosecutor in a criminal case shall ... refrain from prosecuting a charge that the prosecutor knows is not supported by probable cause". The subject language of the memorandum, in my opinion, rises to the level of no probable cause for the allegation of failing to recoup the Spencer moving expenses."

When I got this transcript, I contacted Feland several times over the last few weeks, asked her directly about this situation, and she refused to address the key question - had she provided Blunt with a copy of the State Auditor's memo which cleared Blunt of any malfeasance related to Spencer?

To her credit, the Prosecutor (who is actually running for District Judge (!!)) initially responded to my queries. Here's the detail.

From me to Ms Feland on January 16, 2010:
Thanks for the response, but I'm not sure it answered my question. [I had asked in two previous emails if the Wahl memo was provided to the defense] I don't want to mischaracterize or misunderstand your statement. Specifically, was the Wahl memo of November 2007 provided to the defense? [emphasis added]

Ms Feland's response on January 19, 2010:
"All information in the Wahl memo has been disclosed to the defense. Given the extra large volume of discovery in the case, I have no way to provide to you the exact date of disclosure of the memo itself. The Wahl memo was also a public record at the auditor's office. [emphasis added] Therefore, as I stated, there is no issue with it and it is a waste of time."

Here's what this means. The prosecutor has no record of providing the defense with a document that would have allowed the defense to prove that the prosecution's main charge was not a crime. Not only that, but she infers that somehow the defense should have checked with the state auditor? This is incredible, unbelievable, and appalling. What other documents is she unaware of?

In this country, and in North Dakota as well, the prosecution must provide the defense with any and all potentially exculpatory evidence.

That is not a suggestion, or a recommendation, or a 'if you remember to do it', it is a legal requirement.

Failing to do so is prosecutory misconduct. The defense is not required to check with the state auditor, the county clerk, the registrar of voters, the town librarian or dog catcher - the prosecutor must turn over any and all information relevant to the case to the defense. Especially if that information destroys a central charge against the defendant.

What in the hell is going on in North Dakota?

And why are they persecuting a guy who's performance at the ND state work comp fund was exemplary?

Blunt's case is on appeal at the ND Supreme Court, and he is waiting for their ruling which could come any time. I fervently hope they reverse the charges and reprimand Feland.

Posted by at 6:53 AM | Permalink | Comments (2)

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 at 7:26 AM | Permalink | Comments (3)

A good friend and colleague has reviewed my 2010 work comp predictions and provided some incisive comment; he's a very knowledgeable, highly experienced, very well placed exec and his thoughts are well worth your consideration.

Read them here.

Posted by at 7:10 AM | Permalink

I'm often asked how and why workers comp and individual/group health differ; the question comes primarily from investment and private equity firms, managed care vendors, and pharma.

The question is both simple and difficult to answer, as the follow-on query is almost always 'why are the two so different, and when is work comp going to 'catch up'?

First, the differences. The biggest difference is in the type of coverage; WC involves both medical and wage replacement while individual/group is only concerned with medical coverage. Of course, individual/group health is far larger in terms of dollars, as WC premium and equivalents are around $80 billion while individual/group health is more than ten times that at $840 billion.

Work comp:

- Regulated by states and mandatory in every state except TX
- Only covers injuries/illnesses occurring during or arising out of the course of employment
- Return to Work is critical
- The insurer owns the claim forever...or until the claimant is back to work, the claim has been settled and/or has reached maximum medical improvement
- Mix of injuries and illnesses is different, mostly Musculoskeletal/orthopedic, trauma and some cardiovascular (public safety in a handful of states
- Coverage is "first dollar, every dollar"; No copays, coinsurance, or deductibles, and no caps
- Drug "Formularies" tend to be fairly open
- Provider types - Occupational Medicine, Physiatry/PM&R, Orthopedics, Neurology, Neurosurgery, General practice
- Relatively few physicians handle most WC cases; 65% of claims in CA handled by 2.2% of physicians (<900 physicians) (source CWCI)
- Comp docs only treat the occupational injury, NOT the 'whole person'

Individual/Group health:

- Not mandatory or required by law
- Regulated by states (fully insured) and/or Federal government (ERISA)
- Covers all types of injuries and illnesses
- Wide range of provider types
- Physicians treat the 'whole person' for all conditions and co-morbidities
- Unconcerned about Return to Work
- Covers treatment delivered during the policy year only
- Employs cost sharing and seeks to affect patient behavior via deductibles, copays, coinsurance
- Drug formularies are dictated by payer and PBM, can be highly restrictive

As to the 'why', that's a longer answer. The question usually assumes work comp is somehow 'behind' the group/individual world in terms of care management, reimbursement, and overall sophistication - a view not without some justification. However, the individual/group health world would benefit greatly from the emphasis, if not sole focus, on functionality that pervades and drives work comp medical care, a focus that is sadly lacking in the non-work comp world.

That said, some of the medical management approaches used outside of comp would certainly help address medical cost drivers - some form of financial incentive for claimants, more intelligent disease management and use of expert networks, tighter formularies and much, much more use of clinical guidelines would be a great help (if used appropriately).

Some will never happen - financial incentives for claimants is probably the most obvious example. And for good reason - WC covers employment-based issues, and requiring the employee to pay for care for a condition incurred as a result of employment would be a non-starter in pretty much every state.

What does this mean for you?

Group could learn a lot from comp; and comp still needs to learn more from group.

Posted by at 8:00 AM | Permalink | Comments (2)

Workers' Comp Insider is one of the best-written, most topical, and entertaining blogs I've read, despite its focus on the mundane, usually unexciting world of workers comp.

Along with co-author Julie Ferguson, Jon Coppelman is the person behind the keyboard for many of WCI's posts, and a better pair you won't find anywhere (except at Colorado Health Insurance Insider where Jay and Louise do stellar work).

Jon's skill is evident in his post earlier this week about the new head of New York's work comp department - a (get this) former hedge fund exec.

Posted by at 9:18 AM | Permalink | Comments (2)

It appears I've upset at least one of the good folk of North Dakota.

In an article published yesterday in WorkCompCentral about the prosecution of former North Dakota state workers compensation boss Sandy Blunt (subscription required), Bill Kidd quoted prosecutor Cynthia Feland:

"In an e-mail reply [presumably to Kidd's query], Feland said that "I find it unfortunate that the authors [yours truly and Peter Rousmaniere of Risk and Insurance] have chosen to print information without checking their facts."

"A transcript of the trial is available and if they would have reviewed it, it would have been obvious that the information they received and used to write their stories and base their opinions was inaccurate," Feland wrote."

I'm assuming Feland was referring to this comment in a post from last year; "Blunt was charged with authorizing sick leave for and failing to collect moving expenses from a Fund exec who was terminated within two years. In theory, if he left within the two years, the moving expenses paid by the Fund should have been reimbursed.

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

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

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

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

That's a big assumption, as her comments could have referred to any of the other posts I've written about the Blunt case, but as the possible withholding of exculpatory evidence is the most egregious of the prosecutor's actions, I'll focus on it.

Ms Feland made an assumption of her own in her note to Kidd; in fact I have read the relevant parts of the transcript, and searched the entire transcript for any mention of the memo in question. Couldn't find any reference to it anywhere. Now, I'm certainly no attorney, so it's possible I didn't look for the right words. So I've asked Ms Feland to tell me exactly where the memo is mentioned in the transcript, when it was placed into evidence, and/or any other official documentation that it was shared with Blunt before or during the trial.

I'll keep you posted.

Posted by at 5:35 PM | Permalink | Comments (1)

The decrease in the workers comp drug cost inflation rate that persisted for five years appears to be over. According to HSA's Sixth Annual Survey of Prescription Drug Management in Workers Compensation, the five-year 'decrease in the rate of drug cost increase' is over, as drug costs across the industry were up 7.5% in 2008, compared to 7.7% the year before.

Workers comp payers, including large and mid-tier insurers and TPAs, are increasingly knowledgeable about drug costs, utilization, drug management approaches and programs, and cost drivers. However, while some are quite sophisticated, a few continue to exhibit little understanding of this cost area; unsurprisingly these are the payers with the highest drug cost inflation rates.

In contrast to prior years, the drug cost inflation rate tended to be lower at smaller payers than their larger competitors, as smaller payers seem to be 'faster to market' with utilization controls, adjuster education, and data sharing with their PBM partners.

Once again, utilization is seen as the key driver, with respondents citing over-prescribing, over-use of pain medications, and physician prescribing patterns as key reasons for cost increases.

The recent URAC initiative to 'certify' work comp PBMs met with mixed reviews; twice as many respondents considered URAC certification 'not important at all' as viewed it as 'extremely important'.

To combat cost inflation, savvy payers are increasing their investment in data mining and analytics, adopting step therapy programs, enforcing mandatory generics, and calling on their PBMs to provide clinical support for drug management. Payers are more knowledgeable about and 'on top of' their drug cost and utilization data, with most having ready access to generic fill rates, generic efficiency, network penetration, price changes, and other summary information. First fill capture statistics are also more widely captured, as payers seek to gain control over drug usage as early in the claim cycle as possible.

Continuing a five year trend, no one PBM has established a dominant position in the market as the leading PBM. However, PBMs are all rated much higher than Third Party Billers.

In partnership with the good people at WorkCompCentral, I'll be providing an overview of the most recent findings from the in a webinar scheduled for Tuesday, January 12 from 1:00 - 2:00 pm eastern. The cost for the webinar is $149.

Webinar registrants will receive a copy of the Survey results, to register click here and enter the code 'Hsarx'.

The public version of the Survey will be released on Monday, January 18. If you would like a copy, email info AT healthstrategyassoc DOT com. Seminar participants will receive a separate, detailed version of the Survey.

Posted by at 6:30 AM | Permalink

The five year downward trend in drug cost inflation appears to be over, driven by excessive utilization, pain management, and price increases on a couple key drugs. But not all payers are experiencing increased costs; some actually saw costs decline in 2008, due to strong clinical management, a solid understanding of underlying cost drivers, and a willingness to engage with treating physicians.

Those are among the findings of the Sixth Annual Survey of Prescription Drug Management in Workers Comp, completed late last year.

In partnership with the good people at WorkCompCentral, I'll be providing an overview of the most recent findings from the in a webinar scheduled for Tuesday, January 12 from 1:00 - 2:00 pm eastern. The cost for the webinar is $149.

Webinar registrants will receive a copy of the Survey results, to register click here and enter the code 'Hsarx'.

Posted by at 12:01 PM | Permalink

Sandy Blunt was the victim of prosecutorial misconduct on the part of a North Dakota state prosecutor, accused and convicted of 'crimes' that the prosecutor knew - in advance - were not crimes.

That's the conclusion of an article authored by Peter Rousmaniere in today's Risk and Insurance magazine.

Here's an excerpt from Rousmaniere's article:

"

In late 2006, state prosecutor Cynthia Feland began to investigate Blunt. In April 2007, she charged him with criminal misapplication of entrusted property. Virtually all of the evidence was trivial, such as the $320 the fund spent on lunches at an employee summit and others sums for gift certificates, flowers and small employee bonuses.

Blunt was also charged with misusing an employee's license plate number in trying to identify who had leaked WSI's payroll data to reporters.

Blunt, no stranger to public bureaucracies, responded that this spending was normal even for public enterprises and consistent with prior WSI practices. He also said that neither he nor his advisors knew the expenses were illegal.

In August 2007 a district court threw the case out as lacking merit. The prosecutor won a reversal from the North Dakota Supreme Court. In December 2007, the state fund board, under political pressure, terminated Blunt.

Blunt's criminal trial took place in December 2008. Feland, lacking a respectable case, tarted up the criminal count with three more heavier-looking allegations, one of which the judge threw one out (claiming that Blunt had improperly awarded a grant to a volunteer firefighter association).

The two remaining new charges dealt with Blunt's handling of an employee he had recruited, then forced out. Supposedly, Blunt had allowed the departing employee to earn his unused sick leave and also did not seek repayment of relocation expenses incurred when the person came onboard.

After Blunt was convicted, it came to light that neither the prosecutor nor the state auditor's office had disclosed in discovery or in court testimony a state auditor's memo that exonerated Blunt of error relating to the forced-out employee. [emphasis added]"

You read that correctly. Blunt was not only convicted on the basis of charges that the prosecutor knew were not criminal, but the prosecutor failed to provide that information to Blunt before the trial, a clear violation of the law.

Blunt's case is currently on appeal, and he is waiting to hear on a decision from the North Dakota Supreme Court. If and when, the Court does the right thing and throws out his conviction, Blunt should sue the prosecutor and her accomplices for every dime they have and ever will have. Their behavior was that egregious.

What the state of North Dakota has done to Sandy Blunt is reprehensible.

What does this mean for you?

If this could happen to a person as above-board and completely honest as Sandy Blunt, it could happen to you.

Posted by at 7:36 AM | Permalink | Comments (2)

CIGNA has a new CEO, David Cordani, who is planning on growing the company internationally.

Which may, or may not, have implications for CIGNA's IntraCorp subsidiary.

IntraCorp, the managed care subsidiary of insurance company CIGNA, was perhaps one of the first 'managed care' firms, and certainly was the first major work comp managed care company. In business for almost forty years, the company evolved from a field case management vendor to a supplier of bill review, networks, case management, physician peer review, and ancillary service to the work comp market.

While it is still one of the larger case management vendors, IntraCorp lost considerable business over the last decade as ESIS and other large clients moved their bill review business elsewhere, claims frequency declined (reducing the need for case management and UR), and competitors aggressively pursued IntraCorp's core case management, UR, and peer review business.

Although several investors reportedly inquired about the possibility of buying IntraCorp from CIGNA, former CEO Ed Hanway reportedly refused to consider a sale. Hanway's lack of interest may have been driven at least in part by IntraCorp's contribution to CIGNA's corporate overhead. While CIGNA could have sold the subsidiary any number of times, by doing so it would have to find some other entity to absorb overhead expenses on an ongoing basis, a move that would have led to changes in financial reporting and expense allocation.

Now that Hanway has retired, Cordani may revisit the question. With his stated desire to expand CIGNA internationally, the new CEO is going to have to find capital to fund that growth. While IntraCorp is no longer the preeminent company in the work comp managed care space it has a strong brand, good management, and a wealth of data that could be used for any number of purposes (picking good docs, identifying appropriate patterns of care based on diagnoses...).

That and the renewed interest on the part of private equity firms in the comp managed care business may be a confluence of factors that results in CIGNA revisiting the long-term role of IntraCorp.

What does this mean for you?

More change (possibly) in the what's becoming an increasingly dynamic business equals more opportunity.

Posted by at 8:11 AM | Permalink | Comments (1)

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 at 6:58 AM | Permalink | Comments (3)

You'd think I'd learn not to make public predictions that may come back to haunt me, providing ammunition for folks who think I don't know diddly.

But I subscribe to Teddy Roosevelt's philosophy" "The only man who never makes mistakes is the man who never does anything."

Here, in no logical order, are what I believe will happen in the work comp managed care world in 2010.

1. Acquisitions will accelerate.

We've seen an upsurge in the number of deals of late, with FairPay and One Call Medical the two biggest and most recent. I'd expect this to continue; Bunch may be next to go, but ownership's demand for a 9x + multiple isn't likely to fly. If they manage their expectations and get a bit more realistic, it could happen.

2. Coventry (the big Coventry, not the WC entity) will be acquired.

OK, I predicted this last year and was wrong (or more generously premature). But now that the health reform picture has cleared up, credit markets are (somewhat) functional again, and stock prices of other healthplan companies are up, I'd expect Wise et al to sell their company, perhaps to United HealthGroup.

As to what happens to the WC group if it does get bought, that's worthy of another post - and some deep thinking by big WC payers tightly tied to Coventry WC.

3. The basis for WC Drug fee schedules will start to move away from AWP.

This is a 'gimme'; AWP is disappearing in early 2011, leaving regulators and legislators little choice. The big question is obvious - what replaces AWP, and how will the 'new' fee schedules compare to current ones.

I do know regulators in several states are already deep into this, and are looking at multiple options. Where they end up will have a dramatic impact on WC drug costs (NOT just prices, but TOTAL cost), payers, and PBMs.

Lots more to come.

4. (Some/Many) WC physician fee schedules will change significantly

Congress is very likely to change the Medicare physician fee schedule, which is the basis (to a greater or lesser degree) of all WC physician fee schedules except California's (which may adopt a Medicare-based fee schedule). When that happens, some state fee schedules will change immediately, some will probably not change at all, and others will go thru a process that may well result in modifications.

5. The WC insurance market will harden, bringing more business to case management, UR, bill review, and network vendors.

As the economy recovers and the jobs picture brightens, hiring will pick up and so will the raw number of injuries as well as frequency. That, along with rising medical expense, is the 'cost-side' driver. The 'supply side' of insurance is somewhat cloudier, as there still appears to be excess capacity; Fitch and others believe the fundamentals point to an extended hard market well into 2011, and there's still a lot of capital sloshing around looking for a home. All that said, the current hard market has been around far longer than most, and when things can't continue they won't.

6. The rise of the Medical Director

Several large payers are re-visiting the role of medical management, examining medical costs in detail from multiple angles. What they will, and some are, finding is a need for better medical management of claims. A lot better.

The stuff that passes for 'medical management' in work comp is mostly driven not by a desire to better manage medical care, but a need for revenue - medical management programs have become a revenue and margin generator, a role that has come to supersede their original purpose.

As medical costs rise despite payers' 'investments' in managed care, more payers are revisiting the role and results of their programs, and some are finding there's precious little 'medical management' going on; outdated guidelines, bill review driven by throughput rather than accuracy, networks constructed to deliver phantom savings, case management that is more highly paid secretarial work than anything else. Payers are turning increasingly to their medical directors for more guidance; the M.D.s can be forgiven if they respond grumpily, as many have been all but ignored for years. That's going to change, and is changing fast. I'd expect to see the 'market' for assertive, data-driven Medical Directors heat up considerably in 2010.

7. Drug costs will return to the fore.

Drug prices are up over nine percent so far this year, on top of a 7.5% increase in costs in 2008. After five years of decreasing trend rates, the monster is back. Fortunately we know a lot more today than we did years ago about drivers, due to the great work by Swedlow et al at CWCI and the excellent analyses by NCCI. Unfortunately, there are still far too many payers choosing their PBMs on the basis of price per pill rather than drug cost per claim.

But that's OK, as the price-driven buyers will find their costs go up, while the cost-aware will find the opposite.

8. Florida's attempt to redo facility fee schedules will continue to plod along

The ongoing battle over the work comp hospital fee schedule in Florida continued last month, as challenges to the pending changes were filed by two hospitals, the Florida Hospital Association, and FairPay Solutions. These challenges prevent implementation of a dramatic revision to existing fees pending further action by an administrative law court. This is good news, as the changes will result in dramatically higher costs...

Here's hoping payers get off their collective duff and get focused on this before it is too late. I'm not hopeful.

9. TPAs will continue to try to make up lost margin by internalizing managed care services

This is an easy one, as it simply acknowledges a continuation of a current trend. As employers have abandoned self-insurance, TPAs have struggled to compete, with many forced to slash claims admin fees to hold on to business. They've got to get the dollars to keep the doors open from somewhere, and that 'somewhere' is increasingly their managed care department. What started out as demands for commissions and fees from managed care vendors has evolved into TPAs increasingly internalizing those functions.

This isn't 'good' or 'bad', it is simply an industry dealing with a market reality. Employers who complain should be ready to pay higher admin fees...

I welcome your predictions.

Posted by at 9:00 AM | Permalink | Comments (6)

One year ago - against my better judgment - I made eight predictions about what would happen in the work comp managed care world. Here's how I did.

1. Coventry will be acquired.

Well, that's a helluva way to start out. Needless to say, that didn't happen. I did note that it would happen after the credit markets loosened "enough for potential acquirers to feel a little more comfortable"; that is just starting to happen, but we've a ways to go.

What I didn't factor in was the huge uncertainty surrounding health reform, and the impact of reform on health plans. My sense is this uncertainty will continue well into 2010 as healthplans and investors therein try to figure out what all this means.

Coventry is still an attractive target, although the recent surge in its stock price makes it a pricier deal...

2. Aetna's work comp network business will slowly dissipate.

That prognostication worked out a bit better. AWCA network customers continue to struggle with lousy data quality in some jurisdictions, network expansion isn't progressing as quickly or well as forecast, and payers indicate the effect of discounts is deteriorating. Without a 'champion' at mother Aetna, with several key staff moving on to other opportunities, and with revenues totaling well under one-tenth of one percent of Aetna's total sales, look for that 'dissipation' to continue.

3. Corvel's transition to a TPA with managed care services will accelerate.

According to their latest earnings report, revenue growth for the quarter was "reflective of improved growth in the Enterprise Comp product line, CorVel's integrated claims management solution for workers' compensation claims." The 10-Q expanded on this, stating "The increase in revenues was primarily due to an increase in patient management business, with an increase in network solutions business as well. An improvement in customer utilization of the Company's Enterprise Comp services was the primary reason for the increase in patient management revenues. "

CorVel added another TPA to their portfolio in 2009, acquiring Eagle Claims, a five-year old WC TPA with 62 clients based just outside Syracuse NY in February.

4. Several of the larger payers will announce their own, small physician-centric network products.

Didn't happen, making this about the umpteenth year some of us have been waiting for the big guys (and gals) to decide the one-size-fits-all PPO model doesn't fit.

5. - Correction- Oregon will do a do-over.
In January I said "Oregon's new regs require comp payers to reimburse at fee schedule for those services subject to the FS. Non FS services are to be reimbursed at billed charges" and as a result the state would revise their regs.

Wrong. According to a (admittedly very small) sample, payers have dealt with this and don't see it as problematic. And there wasn't a 'redo'.

6. Innovation

I predicted there wouldn't be any. That's a 'true'. (can't wait to hear protestations of disagreement from those tweaking old processes and products)

7. Specialty managed care will grow

Sure has, especially in physical therapy with the expansion of Align into some additional claims offices and clients, and SmartComp's announcements of various deals. Meanwhile, MedRisk (HSA consulting client) continues to dominate the space, inking a deal with Coventry to provide PT EPO services in most of the states with people in them.

Imaging is also growing - the recent OneCall transaction is an indicator of the private equity industry's interest in WC, while NextImage reflects the emergence of new competitors.

FairPay's acquisition by Riverside is more proof.

8. Medical costs
I predicted costs would "continue to increase far faster than they should, driven by lousy managed care models poorly implemented by payers more concerned with "savings" than claims costs."

I hate it when I'm right. Drug costs are exploding, with 2008 costs up 7.5% and prices (just one component of drug spend, the other being utilization) up almost 10 percent in 2009. Hospital costs are continuing to grow faster than expected.

NCCI's latest figures indicate costs have moderated, but these are from 2007, and don't reflect current results. They also don't include California, NY, and a couple other states.

Here's how I'd score it.

Wrong - three - Coventry, Oregon and small networks

Right - four - medical costs, specialty managed care, innovation, CorVel

Neither - Aetna - but just give it time...

Never one to leave well enough alone, I'll be out with my predictions for 2010 in a couple days.

Posted by at 7:49 AM | Permalink | Comments (2)

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 at 8:16 AM | Permalink

UPDATE

Last Friday I posted the news that One Call Medical was going to be acquired; here's the official announcement which was published yesterday.

On Monday One Call Medical will announce the company has agreed to be acquired by Odyssey Investment Partners, a New York private equity firm. One of the larger private equity firms, Odyssey has some experience in the work comp business, purchasing York Claims several years ago from AIG and by all accounts transforming that firm from a low-end TPA to one of the up-and-comers.

The deal is the result of a process that has been proceeding for several months; as the dominant company in the work comp imaging management space, OCM was the subject of significant interest, attracting bids from several investment firms. I don't know the parameters of the deal, but will guess OCM went for a figure well above $100 million with a valuation north of seven times EBITDA.

While the work comp market is OCM's primary space, the company has recently made successful, if limited, forays into the group health and consumer markets. Look for OCM to expand their efforts in that sector, as there is limited growth opportunity in comp where they handle about one of every six MRI scans.

But for now comp is the revenue driver. A source close to the deal indicated OCM's top line is in the $250 million range, and despite the decline in claims frequency, the company experienced solid growth this year.

This marks the second significant deal in the work comp space this fall; FairPay Solutions was acquired by the Riverside Companies a couple months ago. Sources indicate there is at least one more deal 'pending'; this one looks a little more iffy.

Posted by at 6:01 PM | Permalink

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 at 6:33 AM | Permalink | Comments (3)

In the work comp managed care/claims world, some vendors' revenue maximization efforts are getting ever more clever. I know, I know, I've posted on this several/numerous/multiple times before, but to my never-ending amazement, these practices continue. So here are the top ten warning signs to watch out for (sorry for ending with a preposition...)

Before you start, realize that all TPAs are not out to rip you off, all managed care vendors are certainly not either, and the soft market and unreasonable demands by employers have forced many claims administrators to look for revenue wherever they can get it.

That's fine, as long as you know where your dollars are going...

10. your TPA won't let you use your own managed care vendors.

9. your TPA won't offer a bundled price, including all managed care services. Even worse if you never asked for one.

8. savings reports focus on reductions below charges and don't show reductions below fee schedule/UCR.

7. the TPA determines which cases 'need' case management - and your case management fees continue to grow. sometimes this appears to be OK, as the cost per hour is a deal, but it's highly likely the hours worked are ever-increasing.

6. the TPA won't sign any statement like this one. Unfortunately, that doesn't mean the TPA isn't lying, as some may sign the statement anyway knowing it isn't true.

5. the TPA won't provide copies of any contracts with managed care vendors.

4. the TPA agrees to provide a great deal on claims admin services, with the fine print noting that they have complete control over managed care, investigative, legal, and other claims support services.

3. the TPA's claims admin price is way, way better than the competition's. There is no free lunch, and if the deal is too good to be true, rest assured you're getting ripped off.

2. the claims staff you meet during the pre-implementation meetings disappears when claims come in, replaced by inexperienced/non-experienced/completely ignorant 'staff'

1. you are paying for bill review on a percentage-of-savings-below-charges basis, which motivates the vendor to find the highest-billing, highest-utilizing providers and let them run roughshod over your bank account, all the while trumpeting the 'savings'

I'm sure there are more; feel free to contribute your own.

Kinda obvious, don't you think?

Posted by at 6:47 PM | Permalink

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

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

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

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

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

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

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

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

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

What does this mean for you?

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

Posted by at 1:39 PM | Permalink

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

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

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

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

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

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

What does this mean for you?

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

Posted by at 7:12 AM | Permalink | Comments (1)

It's good to be back in Chicago.

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

I digress.

Here in random order are impressions from day one.

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

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

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

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

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

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

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

Anybody have any ideas?

Posted by at 10:17 PM | Permalink | Comments (2)

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

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

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

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

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

Are you preparing?

What does this mean for you?

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

Posted by at 9:39 PM | Permalink | Comments (3)

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

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

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

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

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

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

Posted by at 6:30 AM | Permalink | Comments (2)

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 at 6:38 AM | Permalink | 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 at 7:13 AM | Permalink | Comments (3)

For the update, see UPDATE below.

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

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

But sometimes that line is crossed.

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

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

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

Here are a couple specifics.

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

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

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

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

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

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

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

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

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

end of UPDATE

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

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

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

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

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

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

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

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

Posted by at 6:58 AM | Permalink | Comments (6)

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

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

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

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

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

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

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

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

What does this mean for you?

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

Posted by at 7:05 AM | Permalink | 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 at 7:14 AM | Permalink | Comments (5)

It's been a wild party in the comp world - and a long one too. A brutal hangover may well be next for work comp payers.

Those who remember the late nineties are getting increasingly nervous, as well we should. The longest soft market in my memory is still around, doggedly refusing to firm up - as it should have, long ago. Work comp premium rates continue to decline, especially in key states such as California (down by a whopping two-thirds in five years) and Florida (an equal drop over six years). Most other states have also seen precipitous declines, driven by successful reforms and a decline in frequency.

Yet medical severity - the comp industry's somewhat-misleading term referring to medical cost - continues to increase in most jurisdictions.

Pause and think about that. Workers comp insurance costs have dropped by two-thirds over five years. Two-thirds. How is that possible? Does that make sense? Is there any way that's sustainable? Don't cite statistics and financials and actuarial reports - tell me what your gut tells you.

Mine's really queasy.

Back in the late nineties, most comp payers thought medical inflation was tamed, as their view in the rear-view mirror indicated medical trend was in the seven to eight percent range. Not so fast, the gods of workers comp proclaimed. Inflation roared in the ensuing years, crushing many payers' financial returns and bankrupting more than a few carriers in the process.

While NCCI reports medical inflation is under control, that's not what I'm seeing. Facility costs are trending up, driven by declining 'savings' from broad, generalist PPOs. Prescription drug costs are on the increase after four years of declining trend. Ancillary costs are also heading higher, especially for those payers yet to fully embrace specialty managed care programs - and regardless of what you may think, that's most of the payers in the industry.

Today's WorkCompCentral reports [subscription required] Liberty Mutual, the nation's largest writer of work comp with premium of $5.4 billion in 2008, is backing out of California and very nervous about Florida. I have reason to believe the big carrier is not leaving California, but the points made in the article regarding market conditions are spot on. Employers Direct already pulled out of the Golden State, and if it weren't for new entrants to both Florida and California competing hard for share, the market in both states may well have firmed up by now.

Yet new carriers are entering these markets - which may be either a horrible idea or a pretty smart move. Unburdened by an existing book of comp claims incurred by writing policies that I believe are increasingly underpriced, the smart ones (if there are any) may be able to prosper as the carriers who showed up early for the party are heading towards the floor.

A more likely scenario is these johnny-come-latelies will party hard to catch up, consuming large quantities of business on an empty stomach. Kind of like freshmen at their first college party, with equally unattractive results.

Is it possible that there will be a 'soft landing'. It is, but it is much, much more likely most carriers will feel like they fell out of a moving cab onto cold, wet, and very hard pavement...

Posted by at 6:26 AM | Permalink | Comments (1)

While there will be differences due to jurisdictional rules, I'd be surprised if we don't see Workers Comp cover many health care workers who get the flu.

Health care workers are getting inoculated due to their higher risk, the prevention information you mention indicates they are at risk due to their employment status, and there's no question of their increased exposure risk.

The Federal government's website, flu.gov, directs workers who are exposed to flu to contact their state work comp boards for questions on eligibility and coverage - that direction alone may encourage sick workers to file for comp, and if they were exposed at work and the exposure meets specific criteria, they may well have a compensable claim.

In addition, lower paid workers who do not have health insurance may - and I emphasize MAY - be more likely to claim WC for flu as they have no other coverage.

My sense is in many jurisdictions and for many claimants, swine flu would be compensable - if it can be demonstrated that the contact was 'during the course of or arising out of employment'. And for health care workers, that shouldn't be too difficult to prove.

Jon Coppelman wrote a good synopsis of this some months ago - here's an excerpt from his piece:

In order for the flu to be a compensable event under comp, certain requirements must be met:

: the individual must be "in the course and scope of employment" when exposed to the virus

: the exposure must arise out of work (as opposed to being a totally random event)

: work itself must put the individual in harm's way

My sense is in many jurisdictions and for many claimants working in health care service delivery, swine flu will be compensable - if it can be demonstrated that the contact was 'during the course of or arising out of employment'. For health care workers, that shouldn't be too difficult to prove.

Posted by at 7:34 AM | Permalink | Comments (5)

No one knows just yet, not even the regulators and legislators who are the ones tasked with coming up with a mechanism to replace AWP - which is going away in less than eighteen months.

More accurately, the First Databank/Medispan version is going to disappear; the Redbook version will still be around.

One option is to use Redbook as the standard, and there are some indications from some states that they are looking at Redbook. But Redbook has its issues - folks who know more than I about these things say it is not updated as frequently as Bluebook, and while it covers more medications, this 'delay' may make it problematic for PBMs who may well get into disagreements with retail pharmacies over the reimbursement level.

Beyond that 'quick fix', here's how the changes may roll out. States with fee schedules set by their legislatures may well find themselves hard-pressed to meet the deadline; some, like Texas, aren't due to meet until 2011, and others have a rather full legislative agenda with a lot more important stuff to deal with than work comp drug fee schedules. Thus, it is entirely possible that some states may not be able to address the issue before the clock runs out.

In that case, PBMs and payers will likely have to use the last version of the FDB AWP file for repricing pharma bills. That's fine if the delay in selecting a new benchmark is a matter of days or perhaps weeks, but if it goes much beyond that we'll see problems as prices charged by pharmacies will change while the reimbursement levels don't. Litigation will likely ensue...

States that manage fee schedules via regulatory process are (likely) going to be a bit better off, as these processes are not dependent on the legislative process and complications thereof. Several states are already carefully evaluating alternative methodologies, and from my interaction with a number of regulators at the IAIABC conference last month, they are goign about this thoughtfully and with their eyes and ears wide open.

The real risk is if fee schedules are changed to match the Medicaid reimbursement rates.

This would be a disaster, as it was in California when physician dispensing exploded, and drug costs actually increased after the fee schedule was linked to Medi-Cal. In NY, where the State also set WC reimbursement at Medicaid, every PBM sent letters to the Chairman of the Workers Comp Board relaying their intention to exit the state if rates were not revised. Fortunately for all parties, they were successful in their efforts.

Unlike workers comp, there is no eligibility problem with medicaid - all recipients have a card. The formulary and DUR processes are well known and electronically administered. In comp, many claimants don't know who their PBM is, and the only drugs that are approvced have to be directly related to the occupational injury or illness. These are just a couple of the distinctions, but they serve to illustrate the fundamental, and real, differences between comp and Medicaid.

Stay tuned - it is likely the big group PBMs and payers will move to another pricing benchmark, and like it or not, that will become the de facto 'standard'.

Posted by at 12:32 PM | Permalink | Comments (2)

Of the many topics worthy of attention, I've been remiss in not learning more about swine flu, aka the H1N1 virus.

According to the CDC, to date there have been 9000 hospitalizations and over 600 deaths due to H1N1, and more are coming. There's no doubt H1N1 will have a significant impact on employers - and also no doubt many have yet to plan adequately.

Here are a couple things to ponder...

1. If an employee gets sick after exposure at work (think teachers...) is that a work comp claim?

2. If a bunch of workers get sick, should you shut down operations for a while? If so, can employees work from home?

Broadspire, the big TPA, is hosting a webinar on H1N1 le\d by Jake Lazarovic, MD, the company's medical director and in my experience a thoughtful and insightful clinician. The webinar is going to be held today (Monday) at 3 est, Wednesday at 1 est, and Friday at 9 est. Click on the links for more info.

Note - Broadspire is not a client.

Posted by at 9:35 AM | Permalink

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 at 7:08 AM | Permalink

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 at 6:58 AM | Permalink | 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 at 7:00 AM | Permalink | Comments (1)

The property and casualty industry will get worse before it gets better, led by the work comp business. That's one of the key takeaways from a session at AmComp yesterday.

The session featured a panel of CEOs from workers comp insurers asked to tell the audience at the AmComp NY meeting what keeps them up at night. None of them mentioned medical costs, although in a response to a question (from your reporter) they all said it was a big problem.

How are they addressing it? One said they just factor 6-9% of medical trend into their rates, another said it was up to the health insurers and the third said you had to have good claims and medical cost control.

With all due respect, I'd suggest that medical is a very big problem in comp, that very few insurers or TPAs have anything approaching effective medical management programs, and there are any number of programs, tools, processes, vendors, and methods that can have a dramatic impact on medical expense.

Which will impact claIms costs which in turn affects losses and reserves and premiums and profits.

I have no knowledge of these insurers' managed care/claims programs; t is entirely possible that one - or perhaps even all - of these insurers have strong, outcomes-oriented medical management programs built around small, workers-comp focused physicians, specialty programs for PT, facility, drug, and imaging, and evidence-based clinical guidelines. If they do, they're well ahead of the market.

As one who started out working in HMO consulting decades ago, the CEOs' statements were reminiscent of what we heard from executives at big indemnity insurers - medical costs were medical costs, they had cost containment programs. They dominated the health insurance industry back in the mid-eighties.

They are all out of business, with one exception. And that exception - Aetna - is the only one that successfully transformed itself into a health plan company.

Workers comp is becoming has become a medical management business. Some smart insurer will figure this out, and when they do, they will win.

And win big.

Posted by at 8:54 AM | Permalink

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 at 9:50 AM | Permalink | 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 at 9:25 AM | Permalink

Following on yesterday's post, I received several emails from payers and vendors alike suggesting other pertinent questions payers may want to pose to their vendors. The most common pertained to fee-sharing between TPAs and vendors.

This practice has long existed in comp; TPAs have charged clients to build links to networks, bill review vendors, pharmacy benefit managers, and case/utilization management firms. These charges may appear as one-time fees, but more often as a percentage of the vendors' revenue from the client. And in some cases, these costs don't appear unless you look very, very closely.

That's not to say it is unethical or illegal or immoral or bad business for vendors and TPAs to share fees - but it certainly is a problem if they don't fully inform their clients. Clients aren't blameless in this either; many employers have beaten TPAs down on admin costs so far that TPAs have to make up the lost revenue from somewhere - and fee splitting is the perfect 'somewhere'.

Several TPAs, most notably Gallagher Bassett, pride themselves on full disclosure of fee sharing. Others will disclose if asked, and a couple - SRS (the Hartford's TPA) and Broadspire - do not participate in commissions (although they may charge an upfront implementation fee, again fully disclosed).

Recently I reviewed proposals from several TPAs for a large self-insured employer in the northeast. Broadspire's administrative fees were considerably higher than the competition, (who shall remain nameless for obvious reasons). But when managed care fees were added in to the calculation, their bid was quite competitive. Several of the other TPAs had low per-claim adjusting fees, but their estimated fees for managed care services were much higher.

(Broadspire is not a client and HSA has no business relationship with the firm)

What do you do with this?

You may want to require your TPA's CEO to sign a document (after your attorneys polish the language) stating words to the effect that "We will fully disclose any and all financial transactions involving (TPA) and any and all managed care entities providing services to (employer) and employer's claimants. This disclosure includes but is not limited to service fees, commissions, implementation fees, RFP and proposal assistance charges, transaction fees, connection fees, membership fees, and any and all other transfer of monies from managed care entities to (TPA)."

Then, ask the same question of your managed care vendors. Hopefully there won't be any surprises.

Posted by at 9:42 AM | Permalink | Comments (3)

Here, in no particular order, are a few questions you may want to pose to the folks who manage your work comp medical dollars. Whether the answers are 'right', 'wrong', or neither depends on your situation, but regardless of the answer, these are things you should be thinking about.

1. Are your incentives aligned? To know, you'll obviously need to have a tight grasp on the strategic objectives for your comp program. Minimize cost? Maintain strong employee relations? Avoid antagonizing union workers? Maximize employee productivity? And the follow on question - do your vendors know and understand those objectives, and finally how have they demonstrated that understanding?

This is the foundation for a successful program; if you aren't starting with the same strategic goal you'll be constantly battling over direction, focus, resources, cost. The relationship will be time-consuming, frustrating, and ultimately fail. To be successful you, and your vendors, must 'succeed' together, or fail together. Here's an example. If your objective is to manage total program cost, make sure the vendors are aware of their role in that effort, and specifically how their fees add to the program's cost. Pharmacy Benefit Managers make money on each and every script that flows thru their network, yet several have very effective clinical management programs that reduce overuse of expensive drugs. How does your program recognize and address this apparent conflict?

2. Are their reports meaningful? I've seen hundreds of reports from managed care vendors, and only a few have been useful. Most recently, I have been reviewing reports on bill review and network results from a couple of the big TPAs; they include 'savings' below billed charges; network 'savings' below billed charges, and network penetration as a percent of billed charges.

The continued focus on billed charges as the basis for calculating savings makes little sense. Paying what you are legally required to pay and no more does not create 'savings'. It's analogous to your credit card company telling you it 'saved' you a thousand dollars by not charging you for fraudulent use of your card.

Savings should be based on cost per claim. How much did you pay for medical expenses - in total and by separate category - and how does that compare to prior years and benchmarks? That's a big difference from the industry's traditional view of 'savings', which look only at reductions in cost on each line item on each medical bill. That metric is helpful, but it can also be very misleading.

If a claimant gets lumbar surgery at a high cost hospital, which bills you $100,000, and your PPO gets a 20% discount, you 'save' about $15,000 - the amount of the discount less the PPO fee.

But lets say the claimant goes to a less expensive, but nonetheless equal quality facility, which only charges $75,000. This hospital happens to be out of network, so there are no PPO 'savings', yet your costs are still $10,000 less than the PPO facility.

So your savings reports show the PPO hospital visit creating $15,000 in savings, the non-PPO stay creating no savings, and your medical costs are $10,000 higher. Oh, and your bonus plan and performance appraisal take a hit too...

That's not to say 'savings' reports aren't useful, but they can divert attention from the key metric - cost per claim. Make sure the PPO reports show savings below fee schedule or UCR, and agree on the basis for UCR as well.

3. Is your utilization review/case management function electronically linked to bill review? My firm conducted a survey of bill review in workers comp earlier this summer, and found that most programs are still not connected. While there are manual workarounds and checks and audit schemes in place at many payers, we all know that they are poor substitutes for automated connections.

After you've asked the initial question, audit several cases to determine if UR determinations actually show up in bill review. A couple places to check - PT visits, MRIs, and drugs. Check the claimant's paid medical records for several months after the initial determination, and look for payment to any provider for that service.

If you've decided to buy bill review and UR from different vendors, it is going to be incumbent on you to ensure they are connected; and this is going to cost you. That's fine, if the benefit is worth the added expense.

These are just a few of the questions that should be on your list, but these should be at the top.

Posted by at 6:41 AM | Permalink | Comments (2)

Coventry CFP Shawn Guertin confirmed the company's commitment to workers comp in this morning's Morgan Stanley Global Healthcare Conference, noting comp is a : "[somewhat] different piece [compared to their medicare and commercial business] that has performed very well this year and will continue to perform well and [will likely] grow going forward."

Guertin's comment was in response to a question from the moderator about potential asset sales or acquisitions; he noted the sale earlier this year of a specialty Medicaid business before mentioning workers comp. Guertin also said observers should not look for Coventry to sell businesses, as their strategic overhaul under Chairman and CEO Allen Wise is pretty much finished.

I'd note that while there are practical reasons that make a sale of some of all of the work comp business unlikely, the financial returns generated by the business are quite attractive, and serve to balance out the Medicare/Medicaid/Commercial health businesses' cyclical nature.

From a practical perspective, Coventry will own its bill review code within a couple weeks after an investment reported to be well north of $10 million; would find it very difficult to separate out its workers comp provider contracts from the other lines of business, and its case management and UR units have suffered from the decline in claims frequency. Thus even if Wise et al wanted to sell the work comp business - which they clearly do not - they would find it quite difficult to extricate it from the rest of their operations.

The twenty minute presentation also included comments on Medicare, medical loss ratios and factors affecting the MLR, and Coventry's strategic thinking concerning health reform.

More on that to come...

Posted by at 11:13 AM | Permalink

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 at 6:51 AM | Permalink | Comments (1)

My post yesterday about the coming changes to the AWP pricing formula for drugs included the statement

Understandably, the pharmacies, both independents and chains, are asking the big PBMs to change their contracts to account for the change by reimbursing the pharmacies a few points higher then their current rate.

Word is the big PBMs - Medco, Express - have politely declined.

The second sentence is wrong. Sources indicate the pharmacy chains/independents and the big PBMs are working thru the issue, or have already agreed to terms intended to preserve "cost neutrality" for the pharmacies.

I don't have all the details on this yet, but wanted to correct my mistake as quickly as possible. More information to follow...

I apologize for the error.

Posted by at 5:01 PM | Permalink

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 i