Work comp hospital costs – what WCRI’s report says, and what it means

The good folk at WCRI have produced a very useful – and very timely – analysis of outpatient facility costs, cost drivers, regulatory mechanisms, and trends in 20 key states.  Timely because the upcoming changes to Medicare and Medicaid’s hospital reimbursement bode ill for workers’ comp, and doubly timely because payers are seeing significant increases in facility costs in many states.

There’s a lot to consider in the study, here’s what struck me.

  • States without fee schedules are way more costly than those states that have outpatient facility fee schedules based on a fixed amount (not percentage-of-charges) reimbursement methodology.
  • States with percentage-of-charges “fee schedules” are about as costly as states with no fee schedules at all.
  • Even states with fee schedules based on a fixed reimbursement can be problematic; Illinois is a great example as it has the highest costs of all 20 study states.
  • Changing or modifying fee schedules appears to drive changes in billing patterns, which are supposed to be based on actual services delivered.

What stands out most is the overall trend.  Costs went up over the study period, sometimes a lot, other times there was an initial decrease after a fee schedule change went into effect after which an upward trend resumed.  And while some methodologies seem to do a better job controlling cost inflation than others, all can be gamed.

Cap reimbursement on a per-procedure basis, and watch utilization go up.

Base reimbursement on a lower percentage-of-charges, and miraculously charges escalate dramatically.

But start with low costs, and those low costs will likely persist; the ten lowest cost states in 2006 were still in the bottom half in 2010.  Yes, some had moved a notch and others down, but no state moved more than two slots.

What does this mean for you?

Watch FS changes in your key states very carefully, but don’t hold out much hope that any big changes will dramatically impact costs over the long term.



Physician dispensers are getting desperate

Oh this is getting fun!

Earlier this week WorkCompCentral published a column ostensibly written by a physician attacking me for exposing the dangers, both physical and financial, inherent in physician dispensing of repackaged drugs.  I say ostensibly because the column reads like it was ghost-written by one of the industry’s shills, perhaps one of Ron Sachs’ interns. (Ron’s the guy physician dispensing company AHCS hired to call reporters to tell them they were suing me).

By the way, I LOVED the column.

It was an amazing combination of pronouncements from an arrogant-beyond-belief doctor, with a really nasty and personal attack on me, my motives, and my ethics.

Alas, it was so poorly done, with so many logical fallacies and nonsensical arguments based on nothing more than fact-free opinion that I can’t believe a real doctor actually wrote it.  After all, doctors are supposed to believe in science; you know, research, medical evidence, facts, logic supported by data – those kind of things.  Yet the column didn’t have any of those, instead it was a mishmash of unsupported claims based on “our experience”, and never directly addressed the key issues I raised in my piece, e.g. retail pharmacies have much more complete access to patient data, and docs who dispense don’t.

(btw, a Summit on Physician Dispensing will be held in Boston on February 25/26.  Sponsored by PMSI and Progressive Solutions, the Summit is free of charge and is held the day before WCRI’s annual conference – in the same hotel.  This is an invite-only event; there are a few slots open.  Email me at jpadudaAThealthstrategyassocDOTcom for details.

The ostensible author, one Dr Rafael Miguel, offered not a single shred of evidence to support his claims of better outcomes and enhanced quality of care. When not denigrating pharmacists, mischaracterizing my statements, and accusing me of profiting from defeating physician dispensers (more on that below), Dr Miguel/the intern hid the total lack of data supporting his claims behind the omnipotence of the god in the white coat, as if his title is proof enough and we non-physicians should meekly listen and obey.

You can tell the physician dispensing industry is in desperate straits when they use surrogates to question the motives of their opponents, fabricating reasons why anyone would dare interfere with their ability to suck money out of taxpayers and employers by charging outrageous amounts for the drugs they prescribe – and dispense – to workers’ comp claimants.

That’s known as “diversion”; when you can’t refute a critic, yell really loud about what a bad person they are.

Well, let’s look at Dr Miguel.

Dr Miguel is a dispensing physician using Rx Development Associates.  A quick check of their website reveals frequent mention of one of the key benefits of physician dispensing; additional revenue for the physician.  RxDA also touts how easy it is to sign up and use their system to generate big profits, “without interrupting or burdening staff members.”  That’s in direct conflict with Dr Miguel’s assertion that physicians “must recover the costs and time to provide this service to workers compensation patients.”

Let’s look at Dr Miguel’s scripts.  He’s dispensed fluoxetine, etodolac, omeprazole, and gabapentin, among other meds. One of those scripts, omeprazole, is commonly used for heartburn.  Omeprazole, also known as Prilosec, can be bought over the counter for about a buck a pill; Dr Miguel charged about $10  pill.  That’s not opinion or hyperbole, it’s fact.  Miguel charged about ten times more for the drug than it would have cost over the counter.

Dr Miguel/the intern contends docs can’t buy drugs for the same price retail pharmacies do, and that’s why they have to charge so much more.  Again, he offers no evidence of this.  In fact, if Dr Miguel had tried, he could have found repackaging companies clamoring to sell him drugs at very low prices.

Finally, allow me to address Dr Miguel/the intern’s questioning of my motives, and contention that my efforts to combat physician dispensing are “what can only be described as an attempt to fatten Mr. Padudas personal bottom line.”

  1. As I have noted many times, I am co-owner of CompPharma, an association of workers’ comp PBMs.  It makes no difference (financially) to me if  physician dispensing dies off, explodes, or just stumbles along. I don’t get a nickel more or less.
  2. My public battle with the industry and its advocates has cost me tens of thousands of dollars in legal fees not to mention hundreds of uncompensated hours.
  3. Yes, PBMs will benefit if physician dispensing ends, but I am not a PBM, nor do I own a PBM, nor do I get paid based in any way on their volume of business.
What Miguel/the intern can’t understand is some people just have principles, standards that they live by, ethics that require them to speak out when they see others doing wrong.
And physician dispensing of repackaged drugs is wrong.




Flu season and Tamiflu – which one’s more hyped?

It’s full-on panic mode; flu season is upon us, the media’s in a frenzy, and the world is coming to an end.  If you didn’t get your shot, you’re going to be in serious trouble, laid up for weeks with a nasty case of the horribles if not stuck in a hospital ER with tubes dangling from your appendages.

To listen/watch the media, you’d think the Mayans were right about the end of the world, if not precise with the timing or cause of earth’s demise. Then again, this is what (much of) the media does – generate eyeballs/ears by getting us all excited about something or other.  Now that the most recent fiscal crisis is a distant memory, there’s got to be something to get us riled up – so flu it is.

Unfortunately the sensationalism isn’t limited to the illness itself; the enthusiasm for Tamiflu, the equivalent of the mining-after pill for flu sufferers, is similarly hyped.

Through a combination of carefully-orchestrated clinical trials, precisely-written journal articles, and professionally-managed media placement, the makers of Tamiflu have been able to convince many of the drug’s powerful ability to moderate the effects and shorten the duration of the illness. Sounds like a no-brainer, except…

Except the reality is nowhere near as encouraging.  Turns out Tamiflu actually only shortens duration by a day or so, and while it can moderate the worst of the symptoms, isn’t going to get you up and going in no time.  Here’s what the Cochrane Collaboration, perhaps the world’s leading analysts of medical research and intervention concluded after reviewing the research behind Tamiflu:

1. The manufacturer of the drug sponsored all the trials and the reviewers found evidence of publication and reporting biases.

2. The studies did not show that Tamiflu (oseltamivir) reduced the risk of hospitalization.

3. The studies were inadequate to determine the effect of Tamiflu (oseltamivir) on complications.

4. The studies were inadequate to determine if Tamiflu (oseltamivir)  reduced transmission of the virus.

5. The use of Tamiflu (oseltamivir) did reduce the duration of symptoms by about a day.

I bring this to your attention, dear reader, not to scare you even more, but rather to encourage you to learn more about medical miracles/drugs/treatments before signing up.  If you don’t, you may well find yourself poorer, just as sick, and perhaps with a few side effects you hadn’t counted on.

Thanks to Gary Schwitzer at Health News Review for the tip; his blog is a must-read for those seeking the real story behind the mass media’s health hype of the moment.


Work comp hospital costs on the rise

Workers comp payers around the country are seeing their bills – and payments – for inpatient and outpatient services increase significantly faster than other costs.

And all indications are those increases are going to…increase.

The latest WCRI reports (kudos to Rick Victor et al for getting ever-more current data into their studies) show facility costs are up substantially in several states.  Indiana’s facility costs were substantially higher than WCRI’s median states, driven by prices.  As Indiana doesn’t have a fee schedule for facilities, hospitals can jack up prices whenever they want – and they are.

WCRI reported overall hospital inpatient payments per stay increased 12% per year from 04/05 to 09/10; anecdotal information from HSA consulting clients indicate Indiana hospital prices are up significantly this year.

At that rate, your costs will double every six years.

And that’s the best case scenario.

What’s behind my pessimistic forecast is the news that hospitals will likely take a big hit in the fiscal cliff deal.  Medicare is going to get cut, and policymakers are focusing on facilities rather than physicians as the primary target for reductions in reimbursement.

What does this mean for you?

When – not if – those cuts are announced, we can expect facility costs to increase. In states like Indiana where there is no fee schedule, those increases will be driven by a combinaton of higher prices and more services per episode.

In fee schedule states, watch for significant increases in utilization – more and higher-intensity services per stay.

For a detailed view into workers’ comp outpatient costs and cost drivers, watch WCRI’s webinar on the subject.


Physicians with more experience = lower costs

Health Affairs reported this week something most of us sort of “knew”; the more experience a physician has, the lower their patients’ health care costs are. 

Here’s the money quote:

“…physicians with fewer than ten years of experience had 13.2 percent higher overall costs than physicians with forty or more years of experience. [emphasis added] We found no association between costs and other physician characteristics, such as having had malpractice claims or disciplinary actions, board certification status, and the size of the group in which the physician practices.”

CWCI performed an analysis ten years ago [Does Practice Make Perfect?] that looked at the volume of workers comp cases handled by physicians over an eight year period.  Alex Swedlow and Laura Gardner MD’s research clearly showed a strong correlation between experience and outcomes.  The more workers’ comp patients a doc had, the lower the litigation rate, disability duration, indemnity and medical expense; pretty much every indicator was better. While the two studies aren’t directly comparable, the overarching lesson is the same:

The more experience a provider has, the better the outcomes are.

Of course, this is a generalization; there are older docs who are quite costly, and younger docs with terrific outcomes.  That said, if you’re looking to identify providers associated with better outcomes, those of us with grey hair (or little hair) may be a good place to start.

And yes, the older I get, the more accurate I find this correlation!


Providers’ unmitigated gall

This morning’s workcompcentral arrived with the news that hospitals and device manufacturers somehow are arguing the huge overpayment for surgical devices in California is justified because of the “additional costs” of putting these devices in comp claimants.

Seems the California Hospital Association hired a consulting outfit to see just how much more costly it is to do surgery involving screws and cages and other hardware for people with occupational injuries than non-occupational ones.  And, stunningly, it’s waaaaaaay more expensive!

Yep, wrenching that back lifting a stack of drywall at work requires surgery that is, well, different/more complex/more involved/more time-consuming/more lucrative than lifting drywall at home when you’re re-doing the family room. The doctors, facilities, devices, tools, patients, support staff, all are identical – the only difference is who’s paying for the device – workers comp or Medicare.

The “disagreement” arises over a regulation proposed by DWC California that would set device reimbursement at 120% of Medicare.  That’s ALREADY higher than Medicare, but not enough for the profiteers.

Writing in this morning’s WCC, Greg Jones reported that hospitals and their allies said “additional allowances for devices used in certain spinal surgeries are not enough to make up for lost revenue from eliminating the spinal pass-through”.

No $%&*(.  It’s not supposed to.  

The “pass through” provision allowed these providers to “pass through” grossly inflated charges to workers comp payers.  There’s more to it than this – of course – but the net is this.

Once again workers comp is the trough.  As friend and colleague John Swan often reminds me, pigs get fat, and hogs get slaughtered.


Update – The wages of sin in Maryland – a mild slap on the wrist

In response to several requests, click on the link for details on charges pending against Maryland Orthopedics physicians.

When a doc knowingly overtreats, increasing the risk of adverse outcomes, potentially harming patients, and drives up costs with little apparent regard for patient safety or approopriate treatment, one would hope they’d be sanctioned pretty harshly.

Not in Maryland. 

Jen Jordan reports “This group of physicians [Franchetti et al] routinely performed injective therapies regardless of efficacy, up-coded (say for instance a sciatic nerve block when only trigger point injections were performed or claimed multiple level or bilateral procedures when the facts didn’t line up), dispensed excessive quantities of drugs at extremely inflated prices from within their own offices (despite the many retail pharmacies within a mile of their various locations) on top of the ineffective injective therapies with little to no detail in the medical record other than prescriptions were renewed so as not to draw attention to the quantity and dose, and essentially bilked insurers in Maryland out of millions of dollars over at least the last decade if not longer. They put patients’ lives in danger.”

Did the doc in question, one Michael Franchetti of Maryland Orthopedics, lose his license?  Was his license suspended?  Go to jail?


He’s on probation, has to have a few of his cases peer-reviewed, pays a nominal fine to the state board of physicians, and complete a few tutorials on ethics and billing.

Oh, and he’s still a “HealthGrades recognized doctor” too; so much for those doc rating sites…

Yep, he’s still “treating” patients, sticking needles into people and prescribing opioids, continuing on as if nothing had happened.

This is a travesty, a sick joke, a blatant disregard for patient safety, a complete abdication of responsibility on the part of the Maryland State Board of Physicians.

The conduct of this…”physician”, his overtreatment and overbilling and wanton disregard for patient safety is stunning, as is the pathetic penalty he’s paying.

One patient received 50 steroid injections over a four year period, and 34 scripts for controlled substances – which were dispensed by this doc’s practice – at prices up to 17 times the retail price for the drugs.

Another patient allegedly received 140 nerve blocks over 14 years along with 150 scripts for controlled substances.

If you aren’t outraged/disgusted/shocked, you can read the consent order agreed to by this poor excuse for a physician here.

So, what does it take to get your medical license suspended or revoked in Maryland?  Turns out, the Maryland Board of Physicians has a long history of lax enforcement, handing out relatively mild sanctions if and when it finally got around to doing anything. 

Jen’s outraged.  And you should be too.



Provider consolidation – higher prices, better outcomes

Over the last few years, there’s been increasing consolidation among health care providers – hospitals buying physician practices, health care systems merging, hospitals ‘partnering with’ other hospitals. Overall, consolidation of providers has led to better health outcomes but had also increased prices.
That would be the sound bite, but like all sound bites it misses much of the context and nuance.
First, as noted above this consolidation takes many forms, and these different forms have different ‘results’. A study on provider market consolidation just released by the Robert Wood Johnson Foundation found:
increases in hospital market consolidation lead to increases in the price of hospital care. this is especially true when the consolidation occurs in already-concentrated markets where the price increase can be north of 20 percent.
– “Prices paid to hospitals by private health insurers within hospital markets vary dramatically”
– There is a “growing evidence base that competition leads to enhanced quality under administered prices.” This refers to studies of Britain’s National Health Service, which introduced competition among hospitals for patients as part of the 2006 reforms, as well as previous analyses of Medicare’s impact.
– There’s also evidence that competition improves quality where markets determines pricing, although that evidence isn’t as strong.
To date, there’s no clear evidence that physician-hospital integration improves quality. The pace of integration has increased dramatically over the last two years however this could lead to increased market power – and thus higher prices.
What does this mean for you?
We are in a very dynamic market. This is really unexplored territory, so payers would be very wise to carefully monitor pricing and quality measures in specific markets, paying close attention to those that already have high levels of provider concentration (e.g. Boston, Twin Cities)


Hospital collections down…your costs up?

Seeking protection from double digit annual premium increases, employers have increasingly shifted premium costs to employees and increased deductibles and copays. That’s been largely responsible for the flattening out of rate increases, but there’s been a downstream effect that was entirely predictable.
Hospitals’ write-offs for bad debt were surprisingly stable during and immediately after the recession – since then, they’ve increased dramatically.
In Q4, 2011,“uncollectibles” hit 7.38 percent of gross revenue, up from an average of about 5 percent over the previous eleven quarters.
There’s likely a direct connection between increased employee deductibles and copays and hospital bad debt. And that trend will continue. According to a piece in Health Plan Week [subscription required], employees will pay “34.4% for health coverage (a combination of premiums and out-of-pocket costs) — up from 33.2% in 2011.”
In real money, that’s about eight thousand dollars, and headed higher.
While the higher deductible amounts are undoubtedly making consumers more price sensitive, they also require consumers to pre-fund those accounts so that if and when they need care, the dollars are there. What appears to be happening is many of the health savings accounts aren’t adequately funded so hospitals aren’t getting paid for the patient’s part of the treatment cost.

Simultaneously, Medicaid (about nine percent of the average hospital’s revenue) reimbursement is under enormous pressure as legislators look to reduce costs and Medicare is tightening up as well.
The result? Hospitals’ revenues are shrinking while they’re pressured to improve patient safety, streamline administrative processes, better document care, and invest in IT.
The money’s got to come from somewhere.

What does this mean for you?
Workers comp, auto, and general liability insurers, hold on to those wallets. You’re a very soft target.


Cost shifting to work comp – sure, go ahead!

An article in Physicians News yesterday suggested providers look to workers comp to make up revenue losses from Medicare and commercial payers’ declining reimbursement. That wasn’t stated explicitly, but you don’t have to be a code-breaker to get author Franklin Rooks’ message.
Rooks’ main point appeared to be for physicians to think carefully before agreeing to work comp PPO contracts. Can’t disagree with that, but I do take exception to the several statements which are the basis for his arguments.
As Rooks cited me in his piece, I posted a comment, which is excerpted below.
1. The article stated “Employer direction of medical care tends to erode workers compensation reimbursement to levels below the state fee schedule.” without providing any data or backup whatsoever to support this assertion. Physician News’ editors should have caught this.
In fact there is ample evidence from multiple sources that there are many factors impacting reimbursement, with market concentration of providers and the relative level of workers comp fee schedules [compared to other payers’ reimbursement amounts] chief among them.
2. The article cited the recent effort by Florida’s legislature to ban egregious over-charging for physician dispensed medications. As readers know all too well, in Florida, physician dispensing of medications to workers comp patients has increased employers’ costs by over $60 million with no benefit to injured workers. Data from several sources indicate physician dispensing adds over a billion dollars to the national workers comp tab, again with no discernible, demonstrated benefit to patients. There is, in fact, a critical issue of patient safety in the practice of physician dispensing, as work comp physicians often do not know precisely what medications the patient is taking, and therefore cannot be sure there are not potentially hazardous drug-drug interactions.
I’d also note that workers comp is NOT intended to be the payer used by physicians and other providers seeking to make up for lost revenue from other sources. Mr Rooks’ unstated but clearly intended message is for providers to seek the most reimbursement possible from comp to compensate for declines in other sources.
That is inappropriate and unethical.
Thanks to Sandy S for the head’s up.