Aetna’s workers comp managed care entity (Aetna Workers’ Compensation Advantage, or AWCA) is looking internally for a new leader to replace recently departed Robyn Walsh. Walsh retired from Aetna recently, joining several other senior execs in taking advantage of the vesting and retirement plan.
Sources indicate that Aetna’s search is concentrating on internal staff. While this is admirable, it is also somewhat curious. Aetna got out of the workers compensation business several years ago when it sold its P&C business to the Travelers. With one or two exceptions, most of the AWCA staff have very limited WC experience. Industry knowledge is critical in workers comp, both to build a credible product and to speak credibly to potential customers.
With the very limited success enjoyed by AWCA to date, I wonder if their internal push is more out of necessity than desire. It is indeed difficult to see how this venture has been able to survive as long as it has with one customer in a single state. Perhaps Aetna does not believe it will be able to attract outside talent, and therefore is concentrating its search internally.
On the other hand, given Coventry’s lack of success in finding a leader for its First Health WC subsidiary, perhaps Aetna is just being smart. Perhaps.
Other sources indicate Aetna made several runs at a workers comp pharmacy benefit management firm earlier this year.
This is another head scratcher. Most WC PBMs are independent; buyers do not see much synergy between regular medical networks and PBMs; and given the dollars on the table, there would have been better, more strategic places for Aetna to invest.
What does this mean for you?
Keep an eye on Aetna, and if you are interested in contracting with them, make sure you are contractually protected if they exit the business.

In another sign that meaningful reform initiatives do work, the National Council on Compensation Insurance (NCCI) filed rates for Florida that represent a 4.5% decrease; making the total filed decrease since 2003 22.1%.
These decreases were due to lower medical and indemnity expenses. Think about that – physicians’ fees went up, and medical expenses and total claims costs went down.
That alone drives a major hole in the sales pitch of the large PPO networks, who base their “value” on the discounts they get from providers. Discounts do not drive savings on claims, they drive savings on individual bills. And do nothing to address utilization or frequency.
Back to the results – Florida’s reforms were comprehensive, intelligent, and quite effective. Enacted in SB50A, they included drastic limitations on IMEs, changes to attorney compensation, revised indemnity determination and compensation for injured workers, and most significantly, higher fees for doctors.
While all the moving parts make it quite difficult to assign “effectiveness” to one part of the reforms, it is quite clear that the significant increase in the fee schedule for physicians, coupled with a sharp decrease in the (very rich) hospital fee schedule had two primary effects.
1. More physicians, and evidently more good physicians, are now participating in the WC system. This is a remarkable turnaround, and results from an increase in fees from 83% of Medicare (!) to 114% for primary care docs and 140% for certain specialists.
2. Hospitals have renegotiated their managed care contracts, in many cases decreasing discounts or eliminating them altogether. In turn, this has caused “deep discount” PPOs who make a large part of their income from hospital deals to de-emphasize the state. This de-emphasis means they are spending less time and energy in FL seeking discounts from other providers. My bet is this has, and will, positively impact utilization, as providers’ need to drive utilization to replace lost fees is diminished. A bit of a stretch

While we were paying attention to the mess uncovered by the Broward County School Board’s workers comp audit , Ohio’s workers comp scandal moved into new territory. A report from a panel appointed by Gov. Bob Taft (R) to review the mess in Ohio noted serious problems with oversight, financial controls, policies and procedures, and outside influences.
The Ohio Bureau of Workers’ Compensation writes all the WC insurance in the state, and its investments, which are reserves for payment of future claims, are overseen by a five member panel, none of whom have any investment expertise. Yikes.
Wait, it gets better.
The governor’s former chief of staff was convicted of failing to report several vacations at a home owned by a top campaign contributor, Tom Noe. Small potatoes? Not really – Noe was the guy who invested $50 million of BWC’s funds in rare coins, some of which were “lost in the mail”.
Taft has not escaped unscathed. According to the Akron Beacon-Journal, “Questions about Noe’s investment of state money led to a scandal that culminated in Gov. Bob Taft’s conviction last week on charges he was treated to numerous golf outings he failed to report, including two with Noe.”
And, this won’t end here. Noe, Taft’s former political ally, is contending that Taft knew about the coin investments way before the scandal hit the news. Taft denies this, claiming he first found out about them in news reports after the fact. Here’s the take from an Ohio TV station:
“In other developments Saturday, the Toledo-area coin dealer who managed the workers’ comp bureau investments in rare coins continued to push for Ohio Governor Bob Taft to retract statements in which he accused Tom Noe of concealing his involvement in the investments. Noe’s lawyer sent a news release that contended at least 16 members of Taft’s senior staff, as well as numerous other officials, knew about the arrangement. He also contends Noe and Taft spoke of the fund in a locker room at Inverness Club in Toledo during a May 13, 2001, golf outing.”
In addition, Federal officials informed the Ohio Attorney General that commissions charged by the BWC’s so-called investment advisers were much too high. However, Attorney General Petro evidently sat on the news, which came after the SEC tried for 16 months to get the BWC to take action. While it is unclear if there are or were any political links between Petro and the investors, given the smell emanating from the entire mess, it is certainly interesting that Petro did not take prompt action.
It looks like the governor’s office was treating the state’s workers comp insurer and its assets as their private playground, investing in wine, coins, and other highly questionable “assets”. So far, their efforts have cost the state over $300 million in losses.
Remember, these funds are set aside for workers who are injured, to cover their medical expenses and lost wages.
As much as I want to move on from this, it’s the proverbial train wreck; you just have to keep looking.

I spent most of Sunday and yesterday speaking at several sessions at the Florida Workers’ Comp Educational Conference in Orlando. Nothing like Orlando in August. Also on the panels were several physicians from Florida, Gerry Sander, a PharmD from Express Scripts, George Furlong of Choice Medical Management (a client), and Nancy Brennan of SRS.
Here are a few takeaways.
1. There are a relatively few physicians – my guess is less than 15% – who are problem prescribers. These are the ones who write scripts for Actiq (a narcotic that is only approved for break through cancer pain), Oxycontin in the first month of an injury, and massive doses of other opioids and narcotics. Most of the physicians in the audience were appalled at this prescribing behavior. One physician, Dr. Richard Dolsey of Miami, noted that of the many physicians in his group, and the thousands of patients seen each year, he could not recall a single script for either of these drugs.
2. Although their numbers are small, these “bad prescribing” physicians have an impact on cost that is disproportionally high – Oxycontin and similar pharmaceuticals are the most costly drugs in WC (they account for more dollars spent than any others.)
3. One of the biggest problems with these drugs is their potential for addiction. Once addicted, the addiction treatment becomes the financial and legal responsibility of the WC payer. Detox can be extremely expensive, is quite difficult, to say nothing of the human toll on the individual and their family. One of the physicians on the Sunday panel is a pain management doc – a Dr. Silverman – he recommended a relatively new detox therapy, suboxone, administered in a physician’s office that appears to work quite well with minimal side effects.
4. Physician education is seen as a long term solution or means of addressing drug costs in WC. However, I have my doubts – the entire drug spend in WC is about $3 billion this year, which is less than what drug companies spend on direct-to-consumer advertising. Significance? Hard to penetrate the consumer or physician mind when our resources are so limited.
5. That said, the industry can adopt data mining techniques to identify potentially problematic physicians, patients, or pharmacies and adopt educational approaches targeting specific problems. These should be educational and not confrontational in approach.
The gratifying thing about the two days was the dialogue, recognition of the extent of the problem, and willingness on the part of physicians and payers to address the issues.
What does this mean for you?
Drug costs are the fastest growing part of the WC medical dollar – and perhaps the hardest to address. Start by educating yourself on the problem, and realize that many physicians are doing the right thing, and only a few are problematic.
For articles specific to drugs in WC click here.

The recent news concerning the Spitzer investigations, Broward County’s Work Comp troubles, the Arthur Gallagher payment inquiries and the adverse publicity surrounding same has caused some industry players to delay decisions regarding new initiatives. TPAs particularly have pulled back from some previous “done deals” while they re-examine their business practices, commission arrangements, and relationships with managed care firms.
I am attending the Florida Workers’ Comp Institute, and after one evening’s discussions with several vendors and TPAs the impact is obvious and considerable. Both are lamenting the delays imposed by TPA senior management.
This is a good thing. For far too long, the relationships between some TPAs and insurance companies and their servicing entities has been somewhat cloudy, with rumors of commissions, kickbacks, and other behind-the-scenes payment arrangements periodically surfacing. Now that the Broward audit and Spitzer inquiries (which include subpoenas of managed care firm Concentra and several insurers and TPAs) have shed some light on these practices, risk managers, brokers, and CFOs are paying much closer attention to these relationships.
Part of this increased attention may well be due to the potential for OFAC and Sarbanes – Oxley complications. I am certainly no expert, but the provisions of the “Sarbox” law that require CEOs to sign off on financial statements coupled with the OFAC reporting requirements (who receives funds from the corporation) appear to be playing a significant role.
What does this mean for you?
If you have always competed fairly and ethically, good things. If you have played fast and loose, troubles ahead.
Hallelujah.

Sources indicate the “rebates” that broker Arthur Gallagher & Co. has recently paid to several employers in Florida may be related to contingent commissions and/or fees paid by managed care firms to the broker. At least three municipalities have received checks, including $1.3 million to the City of Gainesville, over $1 million to Lakeland, and over $100,000 for Alachua County.
The State Attorney General’s office is heading up the investigation, and there are apparently internal inquiries under way at several other public entities. Preliminary indications are that at least one city risk manager has been “asked to resign”, and other moves are likely in the next two weeks.
According to the Attorney General’s release,
“There are indications that insurance brokers have improperly steered business to insurers who pay the brokers the highest fees rather than seeking the best deals for their customers. There are also indications that the companies may have engaged in bid-rigging. The alleged practices could be in violation of Florida’s antitrust laws, Chapter 542, Florida Statutes. Penalties allow fines of $1 million for corporate violations, $100,000 for individuals and for three times the amount lost due to illegal activities.”
Gallagher has responded to the inquiry, claiming that this is due to the actions of a single producer who no longer is associated with the firm. The statement follows:
“During an internal process review, Arthur J. Gallagher discovered an over billing discrepancy that did not follow the terms of the contracts for the City of Gainesville, the City of Lakeland and Alachua County…These discrepancies were isolated incidents handled by one AJG producer who has since been terminated…As soon as these discrepancies came to our attention, the situation was immediately rectified with the over billed amount returned and the appropriate Florida authorities notified.
While it is entirely possible that Gallagher had nothing to do with this matter other than receiving the inappropriate payments, it is indeed troubling that
a. it took Gallagher ten years to uncover this problem
b. no explanation other than a brief “we billed you in error” was provided
c. risk managers appear to be at risk over this
What does this mean for you?
Hopefully, nothing…

The Ohio Bureau of Workers’ Compensation announced that it will be significantly reducing reimbursement to hospitals . Cuts will be 21% for inpatient and 17% for outpatient services, and are slated to go into effect October 1, 2005.
Estimates of savings to BWC are about $3.3 million per month, or $40 million a year.
The cuts were the direct result of an analysis performed by a major union in the state which indicated hospitals’ most profitable line of business was workers comp. Previously, reimbursement was 70% of a hospital’s stated charges for inpatient admissions; the new rate will be 55% of charges. Outpatient rates would drop from 60% of charges to 55%.
While one has to applaud the quick action by BWC, an entity that has never been known for fast action, cutting reimbursement that is based on a percentage of charges is a highly suspect way to reduce expenses – what, if anything, prevents hospitals from increasing their charges?
Moreover, this is an across the board cut, and does not reflect any measure of outcomes, efficiency, or results. Thus the hospitals that have excellent results and performance suffer the same cuts as poorly performing hospitals.
Once again, a blunt instrument employed in the name of cost control.