Friday catch-up from the (still) frozen northland…

Hello all!

Well, (or rather, HELL!) it’s snowing in upstate New York…hopefully it’s a bit brighter where you are. Lots happened this week, so here we go.

First, this really needs a series of posts, but it’s so important that better fast than thorough. There is yet more evidence that the earning power of the vast lower-middle class (and poorer folks too) has been steadily declining.  And that’s a major issue for workers’ comp. Here’s the money quote from Neil Irwin’s piece in the NYTimes:

there really is a shift away from the sectors where less-educated workers can earn a decent living. [emphasis added] In 1990, 40 percent of the prime-age male workers without a high school degree worked as operators and laborers, a number that declined to 34 percent in 2013. Jobs in food service, cleaning and groundskeeping nearly doubled in the same span, to 21 percent from 11 percent. But it wasn’t an even trade: Pay for operators and labors was $25,500 in 2013, compared with $20,400 for the food, cleaning and groundskeeping category.

You’re not imagining it. The jobs that are being created for less-educated workers really do pay less than the ones that are being lost. [emphasis added]

What does this mean for work comp?   A few things come to mind.

  • if good-paying jobs continue to disappear, it is going to be increasingly hard to re-employ injured workers in positions where they earn the same pay they did pre-injury
  • comp premiums may decline slightly due to lowered covered payroll
  • we may see more longevity and less movement among workers currently in those jobs, meaning there are fewer opportunities for experienced workers to get re-employed
  • it’s theoretically possible that people working at jobs that are disappearing may see workers’ comp as a safety net

The net is the work comp system is going to be dramatically affected by this economic trend.  We need to be talking about it now, thinking about the potential implications, and seeking solutions – now.

The Catamaran acquisition of Healthcare Solutions was followed almost immediately by United Healthcare’s announcement that the company is going to buy Catamaran. Personally, I think HCS was the linchpin of the Catamaran – Optum deal; HCS’ unique position in the WC PBM, bill review, network, and related businesses made Catamaran so darn attractive UNH ponied up $14 billion just to get in the WC game.

Well, maybe not.  More seriously, UNH will own the third largest PBM, trailing only CVS/Caremark and Express Scripts, Inc.  The combination of OptumRx and Catamaran will fill about a billion scripts this year.  Catamaran itself was a relatively small player a decade ago; it grew rapidly via acquisition and diversification (along with ESI it is the only PBM active in the work comp and auto sectors).

With this transaction, UNH continues to diversify; the chart on page 2 provides a rather striking view into just how diversified this former HMO company has become.  For some, $14 billion seems like a lot of cash.  Not to UNH; this is a company with revenues that will likely hit close to $150 billion this year.  For you work comp folks, that is about 180% of total US WC premiums. 

(full disclosure – I owned a tiny bit of equity in HCS from a prior role on the Advisory Board of predecessor Cypress Care)

The good folks at Washington Labor & Industry (and other state agencies) are asking for public comment on their revised Prescribing Guidelines for Opioids. The pdf briefly summarizes changes from current guidelines, and is well worth your perusal.  Kudos to the Agency Medical Directors’ Group; they continue to lead the way for the rest of the country.

There’s a rather troubling piece in the latest Health Affairs about the cost and implications of over-diagnosis and over-treatment of breast cancer.  As one who is somewhat troubled by the proliferation of pink everything everywhere (cue the calls for my summary execution as insensitive and uncaring), I see this as evidence of a movement in danger of running amok.  From the article:

The average expenditures for each false-positive mammogram, invasive breast cancer, and ductal carcinoma in situ in the twelve months following diagnosis were $852, $51,837 and $12,369, respectively. This translates to a national cost of $4 billion each year. The costs associated with false-positive mammograms and breast cancer overdiagnoses appear to be much higher than previously documented. Screening has the potential to save lives. However, the economic impact of false-positive mammography results and breast cancer overdiagnoses must be considered in the debate about the appropriate populations for screening. [emphasis added]

Is breast cancer a major problem? Yes. As a major killer of women, and a disfigurer that does deep psychological damage, breast cancer is one of the major public health issues nationally.  That said, telling women who DON’T have breast cancer they do, and treating them for it, is awful indeed.

Finally, Darrell Bruga of LifeTEAM asked me if there is any technology platform already being utilized in workers’ compensation that is designed with the end user being the INJURED WORKER? Does anything like that exist where the claims examiner, caae manager, etc interacts with the injured worker digitally to communicate, provide information, provide health information, etc.

I don’t know of any such app; if you do please let me know – email at jpadudaAThealthstrategyassocDOTcom or just comment below.

Friday update

Happy spring…or what passes for it here in upstate New York, which is one day of temps in the high fifties followed by…snow.

Caught a few folks with my annual April Fools post; here’s a list of 10 that are waaaay better than anything I’ve ever done (Arnold’s dip is great) (altho I gotta say the post about Coventry acquiring United Healthcare was a beauty)

(I’m starting a new thing with today’s catch up; there will be a very brief “this may mean” after each snippet to give my take on potential implications)

Back to the real world…where I’m going to get all macro on you for a few minutes.

First up, an excellent piece on how the “news” distorts our world view.  For example, when Anna Nicole Smith died a few years ago, that story alone eclipsed coverage of every other country in the world – except Iraq, which happened to be at war.  In fact, Ms Smith’s untimely demise received10 times the coverage of the Intergovernmental Panel on Climate Change’s seminal report.

No wonder Americans don’t understand anything about anything not on the cover of People or watched on TMZ…

This may mean – it’s helpful to read non-US news sources; BBC and the Economist are two places to start.

Gary Schwitzer has an excellent primer on statistical significance for journalists, an area of study that seems to have escaped many of our leading writers. A key quote:

hard-and-fast rules on statistical significance are somewhat problematic. [emphasis added]

The somewhat arbitrary choice to set the p-value for statistical significance at less than 5% was made nearly 100 years ago.  There’s nothing magical about it. It’s just become a time-honored norm…

In focusing on statistical significance, let’s not forget to question whether even results with a p-value < 0.05 are clinically significant.  In other words, did they make a meaningful difference in people’s lives?

What’s happening in health care?

Hospitals in states that haven’t expanded Medicaid are struggling - big time.  Kansas is particularly hard hit.  What’s behind this is the PPACA reduced Medicare and other funding for hospitals, anticipating it would be replaced by increased Medicaid and private health insurance coverage, and a concomitant reduction in indigent care. When Kansas – and many other states – rejected Medicaid, the hospitals were left hanging. In Kansas alone, the drop in hospital revenue is almost a half-billion dollars.

The latest data suggests 283 mostly-rural hospitals are in financial trouble; since 2010, 48 have closed. This cannot be attributed solely to a failure to expand Medicaid, but it certainly plays a major role.

This may mean – potential cost shifting to private insureds and workers comp in non-Medicaid expansions states.

Wages are starting to creep up as labor markets begin to tighten and employers find they can’t find the skills they need unless they pay more.  There’s also more job movement, as folks leave their current employer for higher pay down the street.  This from The Economist:

In labour-intensive industries the American way of low pay, low staff retention and low motivation may be a false economy. Perhaps a third of Walmart’s staff are reckoned to quit in any given year, which could be one reason why it often scores poorly for customer service. In 2014 it said inept shelf-stocking cost it $3 billion a year—more than its planned pay rise. As the economy improves, many retailers are busy hiring new staff only to see others walk out of the door…

This may mean – higher indemnity payments, but potentially shorter disability duration as jobs are more plentiful.

Deals

Finally, in what has to be one of the bigger deals of this young year, United Healthcare is acquiring PBM Catamaran, which is just about to close their acquisition of work comp PBM/network/medical management firm Healthcare Solutions (an HSA consulting client). This will create a third major PBM to compete with Express Scripts and CVS/Caremark; the new OptumRx (UHC’s PBM)/Catamaran combo will rival CVS/Caremark in size with about a billion scripts annually; ESI remains the market leader.

This may mean – added strength for the work comp PBM business due to more buying power and clinical resources.

What you hear in airport bars…

Earlier this week I ran into a couple of enterprising reporters responsible for a recent stream of articles about workers’ compensation; actually I sat next to them in an Atlanta airport bar.  Evidently they’d been stuck there for some time as they were pretty… chatty…

PhoPublica’s reporters were having a grand old time, reading passages of their work out loud to each other, toasting their skill at turning a phrase, saluting their editors’ genius in assigning them to this story, and planning where they’d display the Pulitzer Prizes certain to come. While there were a couple concerns voiced by industry pundits about a lack of balance or perspective, this didn’t dampen their spirits for long, as one reminded the other they needn’t bother with facts or perspectives contrary to their central theme: Workers are getting screwed by Insurers and Employers.  In fact, they had a term for those contradictory views – “whatevers”, as in, this is about as important to us as parental views on fashion are to teenagers.

They were thumbing through a stack of emails, reports, documents, and studies sent in by work comp researchers; a couple elicited hoots of derision but a few caused some consternation. One in particular from a highly-regarded California research organization had them flummoxed. Evidently their latest article completely misquoted the research organization’s findings; the real data totally refuted PP’s assertion that lots of treatment requests are rejected.

After ordering another round of White Zinfandel, the reporters went back and forth for some time on the right response. I couldn’t make out some of what they were saying, but there appeared to be a debate about the right “strategy” – ignore the real data entirely, bury a correction in a footnote, pretend they never got the message, or send an automated email response along the lines of “We are on vacation in the jungles of Myanmar and will respond when we return.”

This was a tough one, requiring additional sustenance.  Appetizers were ordered (escargot and nachos with brie cheese) and the chatter went on for some time.

In the end, a lightbulb went off; one had the brilliant idea to “correct” the data point but do so AND preserve their central theme – Work comp reform screws employees.

Pen was put to cocktail napkin and after much effort, the intrepid journalists came up with wording implying the treatment requests were only approved because the employers and insurers had bought-and-paid-for the entire review process and all the reviewers.

Genius indeed!

Journalistic integrity preserved, but not at the cost of a) admitting a mistake was made, or b) diminishing their case that Workers are getting screwed by the all-powerful Insurers and Employers.

Their timing was impeccable as well; just as their flight was called, they drained the last few drops of White Zin, scarfed down the few remaining brie-on-toasts, and emailed the revisions to their waiting editor.

Me, I sat stunned, rendered speechless (a rare accomplishment indeed) by the ability of these professionals to get the facts to say what they want them to say, regardless of what the facts actually are.

 

What does this mean for you?

I thought Fox News was skilled at distortion…they could learn some lessons from PhoPublica!

and btw, check your calendar…

Friday catch up

Another deal goes down, more clarity around IMRs, more data on the impact of the Affordable Care Act – it’s been busy.

First up, Select Medical’s purchase of Concentra.

In what looks to have been a pre-emptive move, Select Medical announced its intent to purchase occ med clinic firm Concentra from parent Humana. (btw great reporting by BI’s Stephanie Goldberg; she has more detail than any other source.)  Concentra, which has about 300 stand-alone clinics and 240+ on-site clinics, claims it handles 14% of all occupational injuries (they refer the more complex ones to non-Concentra providers).

The acquisition makes strategic sense for Select as it adds primary care to its current portfolio of physical therapy, rehab, and long-term care operations.  It also expands Select’s geographic reach considerably, albeit in a different line of business.

We will track the integration of Concentra and Select going forward; expect to see more efforts on the part of Select to work directly with payers, and a stronger negotiating stance with networks now that they have more market clout.

ACA implementation

A big concern and one certainly noted by opponents of ACA was the purported cancellation of large number of employer-sponsored health insurance plans that failed to meet ACA coverage standards.  New data indicates less than 1% of employers surveyed reported cancellations due to coverage standards.

In contrast, somewhat less than 5% of individual policies were canceled due to coverage requirements.

A Robert Wood Johnson Foundation report (thanks to AthenaHealth) report indicates docs are not getting swamped with newly-insured patients seeking primary care.  Key findings include:

  • New patient visits to primary care providers increased from 22.6% of all appointments in 2013 to 22.9% in 2014.

  • The percentage of visits with patients with complex medical needs decreased from 8.0% of appointments in 2013 to 7.5% in 2014.

So far, doesn’t look like primary care providers are overwhelmed – HOWEVER that is national data, and things certainly vary from region-to-region.

While primary care isn’t being overloaded, the health care delivery system is undergoing wrenching changes – with small, safety-net hospitals probably the most affected. Expect to see closings, consolidation, and takeovers as these most-vulnerable providers lacking scale, resources, and brand find they can’t survive.  For a glimpse into the near-term future, track what’s happening in California.

Work comp

The California State Fund is growing, as the market hardens and rates increase in the Golden State.  California is a bit of an anomaly as the market appears to be softening somewhat in the other 49, but a 52% increase in earned premium indicates the State Fund’s moves to rationalize pricing via tiers along with other insurers pulling back from California is driving more business to the Fund.

Drugs

Finally, great piece from AIS’ Lauren Flynn Kelly on pharmacy’s biggest cost drivers - spoiler alert – the top two are Hep C drugs and compounds…

Enjoy your weekend!

Can California’s comp system be fixed?

David Deitz, MD PhD was last up at CWCI, his task to bring it all together by asking an apparently simple and straightforward question:

What can California learn from Washington?

Or put another way, “Can California’s workers comp system be fixed?”

Possibly.

First off, there still isn’t much of a focus on quality of care in California.  Outcomes in workers comp are still worse than in group health – despite more care for many of the same conditions.  Many state systems still rely on judicial, administrative, or otherwise “non-medical” authorities to make decisions about what are essentially medical issues; fortunately California does not. Cue the IMR complaints…

That’s good news; however just by virtue of being a work comp patient, things aren’t so good. A 2005 JAMA-published analysis indicated 83% of studies (175 out of 211) found that just being a WC claimant was associated with worse outcome after surgery.

There’s a lot of research and analytics and reporting in the non-workers ‘comp medical world related to outcomes, costs, and cost effectiveness, with “a lot” especially true when compared to the paucity of such research in workers’ comp outside of L&I, CWCI, and a couple other sources.

Dr Deitz referred to a “massive number of care improvement initiatives that are going on throughout the health care system” (paraphrasing), a trend that will continue with or without, ACA. Again, this may help work comp as better care = better care for work comp too + a healthier population.

David also noted the questions we are encountering in workers comp are nowhere to be heard in the real world; there are no questions about evidence-based medicine in group health.  EBM is embedded in the very fabric of health care contracting, delivery, measurement. It is accepted fact, a core operating principle, fundamental. And the work comp systems would benefit immensely from a healthy dose of EBM.

One supporting data point is what’s happened in Texas, where they named a Medical Director and adopted guidelines, strong UR, formularies, EDI, and measurement of results.  While Texas isn’t perfect, it’s gotten a lot better.

Unfortunately along with Washington, Texas is one of only two states that has made significant progress in adopting changes that have significantly improved medical care delivered to injured workers.  However, it’s not for lack of opportunity.  Dr W Brose’s HELP Pain Medical Network is just one source of high-quality, workers’ comp-specific and relevant data on treatment outcomes.

The money quote – “workers’ comp is the most costly and inefficient way to deliver medical care that humankind has ever invented.”

And care improvement is possible in WC but requires systematic reform.

We have a system that is inefficient, very expensive, and delivers poor quality care.  That has to change.

Dr Deitz’ final point – improvements in workers’ comp medical care MUST happen.

 

 

 

Medicare doc fix – here we (don’t) go again…

The annual caterwauling about Medicare physician reimbursement has begun.

For those who just want the takeaway – there very likely won’t be any substantive, long-term “fix”, but rather another temporary – and very slight – increase in reimbursement.

The latest version of Congress is arguing back and forth about what to do to address the Sustainable Growth Rate or SGR, with the GOP sharply divided and more liberal Dems objecting to any fix that will require seniors to pay more for their Medicare.

What’s going to prevent a longer-term fix is simple; by not doing a long-term fix and thereby kicking the can down the road, Congress doesn’t have to recognize – and deal with – a big addition to the federal deficit.

Well, that and the normal inability of Congress to do anything at all.

Lest you think this is new, it has been going on for over a decade; here’s more detail - just in case you want to be the center of attention at your next cocktail party…

The Medicare SGR formula/process was first implemented in 2000, intended to establish an annual budget for Medicare’s physician expenses and thereby better control what had been steadily increasing costs. Each year, if the total amount spent on physician care by Medicare exceeded a cap, the reimbursement rate per procedure for the following year would be adjusted downward.

And for thirteen of the last fourteen years, reimbursement – according to SGR – should have been cut, but each year (except 2002) it was actually increased, albeit marginally. Because Congress didn’t fix the problem, each year the difference between what Medicare was supposed to spend on docs and what Medicare actually spent was added to an off-the-books deficit.

The result is a deficit that is now about 210 billion dollars, a deficit that we’re carrying on our books.  Don’t blame CMS, blame Congress.

The reason the deficit is still there, and still growing, is simple - fixing SGR permanently will require acknowledging the deficit and thereby adding it to the total debt.

As we discussed a while back, not fixing SGR may well be worse, as it is a fatally flawed cost containment “approach”. The 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 seven years ago, and its done nothing but get worse. Not only does the SGR approach contribute to cost growth, it also ‘values’ procedures – doing stuff to patients – more than primary care.

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

What does this mean for you? 

For readers in the work comp world, any change to Medicare’s fee schedule will eventually affect many state work comp fee schedules – but this is by no means straightforward.

It’s Friday…and none too soon

What a %^&*$#$* week!

Like many, I spent far too much time this week dealing with the fallout from the ProPublica/NPR series on workers’ comp.  I really need to devote more time to real work, and less to educating folks after the fact…and cleaning up the mess.

One quick point; in the original Demolition article, the authors state:

in 2013, insurers had their most profitable year in over a decade, bringing in a hefty 18 percent return.

I’m not sure how they are defining “return”; usually it implies profit, but that doesn’t seem possible. I have a query into Michael Grabell, the Demolition article’s author, and will report back if/when I hear more.  According to NCCI, work comp insurers [opens pdf] delivered a 2013 pre-tax operating gain (for private insurers) around 14% while state fund gains were about half that.

Of course, that was a pretty very good year; over the last decade, workers comp writers averaged a 7.1% return on net worth, which is another way to look at “return”. Can’t locate any other data or research that is any where close to the 18% number; will let you know if something turns up.

UPDATE

MIchael Grabell of ProPublica responded to my query this afternoon and indicated the data came from NCCI and AM Best and was also referenced in John Burton’s Workers’ Compensation Resources Research Report.

Without getting too deep in the weeds re combined ratios, whether it’s appropriate or not to include dividends, and other minutiae, I can see why someone might look at those reports and get the impression WC is wildly profitable.

In general, it is inaccurate to say insurers’ return was 18 percent as this figure does NOT represent all insurers.

  1. NCCI reports data from the states where they work; this does not include California, New York, New Jersey and eight others. 
  2. NCCI and AMBest data is only for private carriers, and does not reflect state funds; these are also insurers and their “returns” were far less than 18%.
  3. Data from monopolistic states, where insurance is purchased from the state, is also not included.  Monopolistic states include OH ND WA WY.

More to the point, if you are trying to make the point that insurers are getting fat while workers are getting screwed, it’s helpful to point to a VERY profitable year.

However, if one wants to be objective, looking at one year does not provide an accurate picture of the financial status of any industry; one could just as easily look at 2009, 2010, or 2011 where private carrier results were break even at best.

Kudos to Jill Breard of LWCC and Elessa Young of UPMC – both found far too many typos in my blogs from last week’s WCRI conference.  I won’t tell you how many Jill and Elessa found – that would be mortifying.  Thanks ladies, your diligence is much appreciated!

There’s a great piece by WorkCompCentral’s Greg Jones this am about the IMR process in California; evidently someone inadvertently sent an email – “purportedly from [IMR vendor Maximus] to WorkCompCentral..” that indicates payers have failed to send medical records within 90 days for more than 5000 cases. While the number of cases with missing records has decreased significantly over the last year, there’s no indication any fines or financial penalties have been levied against the responsible entities.

Not sure what is going on here, or why, or who is responsible.

This story will have legs…

 

Spring is here in HealthWonk Land!

Ok, I’m a bit early…

here in upstate NY the sun is out, and my colleagues in New England can almost see the tops of the cars stuck in drifts created by aggressive snowplowing.

So, spring must be on the way!

To celebrate, Brad Wright has penned the biweekly edition of Health Wonk Review, bringing a fresh, sunny, and bright collection of thought pieces from Wonks like us direct to your internet-connected device.

Bask in the glow, knowing you’ll be in flip flops and shorts in just a couple of…months!

Workers’ wage replacement – the real story

WCRI’s Evelina Radeva focused on employee wage replacement, a particularly timely topic given NPR and ProPublica’s ongoing series on the Demolition of Workers’ Comp.

Suffice it to say that PP’s reporters would have greatly benefited from Ms Radeva’s presentation.  Informed sources indicated that reporters Michael Grabell and NPR’s Howard Berkes reporters failed to contact WCRI before this week; a rather stunning oversight on the part of the reppporters.

How any journalist reseaching workers’ comp could neglect to even call the nation’s pre-eminent research organization is beyond me.  They would have been well-served to engage early and often with WCRI and their many experts on all aspects of workers’ comp.

Radeva’s deep dive into weekly wage benefits in IN and NY; Indiana is raising their maximum weekly wage by some 20%, generally aligning Hoosiers with the other 15 states in the study set.  On average, 12% of workers hit the wage replacement cap across all 16 states.

Of note NY also increased their maximum weekly wage several years ago; California has as well.

Peter Rousmaniere raised an interesting question that unfortunately went beyond WCRI’s ability and mission – why is there a cap on the maximum weekly wage?

WCRI Rick Victor answered Peter’s question by noting the impact of tax brackets, the tax-free nature of work comp indemnity benefits and anecdotal information that higher-paid workers get other benefits from their employers that help offset lost wages – while acknowledging there is wide variation among and between the states.

Lower fee schedules, increase costs?

Dr Rebecca Yang discussed the correlation of fee schedules and associated physician billing activity.

Key takeaways

  • There’s somewhat of a correlation between low office visit reimbursement rates and higher incidence of physician dispensing.
  • evidence from CA indicates that when th FS whas reduced, doctors coding practices did too – more office visits were coded as level 4 and level 5, while the frequency of lower level visits decreased proportionally
  • when the fee schedule was subsequently increased, the trend to more upcoding moderated – then resumed when the fee schedule was frozen again.
  • this experience was essentially replicated in Louisiana
  • in Florida, a change to the fee schedule for facility-based lumbar MRIs essentially increased reimbursement for “unscheduled” MRIs when compared to “scheduled” MRIs.  Perhaps you, dear reader, will not be shocked to learn that “unscheduled” MRIs went from about 1/3 of all lumbar MRIs to over 2/3 over the next few years.

What does this mean for you?

Blunt instruments – such as the physician fee schedules in place in 42 states – CAN BE opportunities for bad actors to game the system, while hurting the good folks.  

Not to say they should be abandoned, but rather it is necessary to think about what will happen if you change fees (or other care-based reimbursement rules) – not what you hope will happen.