Making work comp services more “efficient”

That is the reason there’s been so much investor interest in workers’ comp – we are the epitome of the “yellow sticky” business…


Workarounds abound, driven by individual adjuster’s requests, insurer system limitations, ever-changing state requirements, unrealistic-but-nonetheless-mandatory employer demands, and system “upgrades” that eliminate prior changes built specifically to accommodate a specific customer.

A couple examples…

Some state regulations require insurers to allow physician dispensing of drugs only within seven days of the date of injury. This requires the payer, Pharmacy Benefit Manager, bill review processor, and adjuster to have a “counter” to make sure they aren’t approving/allowing/paying for doc dispensed drugs they shouldn’t be. Data feeds have to be designed and built and tested, new fields added, new alerts coded, and staff trained and monitored and QA processes developed.

Or, more likely, put a yellow sticky with “do not pay Doc Disp Rx w/i  DoI” on that computer.

A large employer’s risk manager does NOT want Dr Awful to perform any Independent Medical Examinations (IMEs).  The employer TPA has to ensure its adjusters never use Dr Awful.  The adjuster that usually handles that employer’s claims is out on maternity leave, and somehow their replacement is supposed to KNOW this, perhaps by puzzling thru the SLAs (Service Level Agreements), reading the special handling instructions, or asking their manager.

Or, more likely, just put a yellow sticky with “DO NOT USE DR AWFUL FOR COMPANY X’S IMEs” on that computer

Pretty soon you get a cube that looks like our photo above.

Our industry is seen – rightly so – as horribly inefficient, ripe for automation, desperate for change. It is also inherently un-automatable, for several reasons.

First, it’s a state-driven system.  And when you’ve seen one state, you’ve seen one state.  Fee schedules, billing rules, employee direction to preferred providers, clinical guidelines, utilization review, state forms, dispute resolution processes, documentation requirements, all vary from state to state, and are constantly changing.  It’s just very, very hard to stay on top of these changes, figure out how to implement them, and also educate adjusters, clinical staff, bill processors, employers, lawyers and patients.

Second, payers chronically under-invest in technology, so even if the vendors have this whiz-bang terrific artificially intelligent tech platform, chances are pretty good they are trying connect with a payer just a generation away from the green screen era…if they ever left it.

Third, TPAs and service vendors have gotten very good at figuring out how to jury-rig their platforms and workflows to accommodate demanding customers.  It’s a hyper-competitive business; it’s either accommodate or lose the business.  Often it comes down to Martha or Mike in operations knowing that Fred the adjuster wants his reports on pink paper on Tuesdays and purple on Wednesdays.  And if that’s what Fred wants, that’s what you need to give him to earn – and keep – his business.

What does this mean for you?

Smart people who really understand the business can find lots of ways to do things more efficiently, increasing performance while stripping out cost and eliminating errors. However, if one doesn’t really understand the business, making things more efficient may well disrupt and break processes put in place because customers want and need them to work that way.

Highlighting the lowlifes – Real investigative journalism looks into workers comp


Investigative journalists are catching on to the widespread, rampant abuse of work comp by unscrupulous “doctors” and scam artists who’ve figured out it’s easy to make bank by cheating employers and taxpayers out of their workers’ comp dollars; and a whole lot less risky than taking on Medicare or Medicaid.

Christina Jewett’s series in Reveal highlights the lowlifes in California who’ve made millions filing fraudulent claims for non-existent medical conditions attributed to both real and imaginary patients. Comparing work comp fraud to Medicare, Jewett cites the relative ease and low risk inherent in cheating workers comp compared to the higher risk, harsh penalties, and Federal investigative muscle confronting would-be Medicare fraudsters.

The list of scams won’t surprise anyone who’s been in workers’ comp; fake diagnoses used to justify procedures that never happened; non-existent medical providers billing for services never delivered to claimants; claimants subjected to surgeries for conditions they never had.

Nauseating indeed, if for no other reason than we’ve seen it all before so many times.

Another “area of opportunity” for profiteers looking to shake the work comp money tree is the air ambulance industry. A recent Nightline story shines a very bright light into the very cloudy world of “life flights;” families bankrupted, insurers bilked, and employers stuck with bills for “life-saving” flights for patients whose lives were not in imminent danger.  Last summer, James Laughlin reported there were over five hundred fee disputes between comp payers and air ambulance companies in just one state – Texas.

I applaud Nightline, Jewett and the Center for Investigative Reporting for their diligence.  It’s remarkable how real journalists can help focus public attention on what’s really wrong with workers’ comp.

Michael Grabell and Howard Berkes could learn a lot from Nightline and Ms Jewett.

Obamacare – Round Two

Elections have consequences, none more so than this one. With the GOP headed for potentially historic losses in the Senate and House – and another four years of a Democratic-controlled White House and administration, policy makers are working on what some are calling “Obamacare, Round Two.”

That’s the quick takeaway from conversations with several leading Administration officials earlier this week in Atlanta.

After eight years of mostly-failed attempts by the GOP to de-fund, repeal and obstruct the PPACA, the anger at these “obstructionists” is being channeled into both legislative and regulatory initiatives designed to increase coverage, dramatically reduce consumer costs, and expand regulatory authority over states and private insurers alike.

And, in what appears to be more than just an afterthought, fundamentally change occupational medical coverage for many employers by shifting it to Exchange-based plans.

Specific focus is on requiring state expansion of Medicaid and “re-funding” the Co-Operative health plans that had billions stripped away last year by GOP Senators, resulting in the bankruptcy of many. This last is the subject of some internal debate, with two alternative approaches emerging as alternative solutions.

One is to fully fund current Co-Op plans while allocating additional funds to new start-ups in those areas where Co-Ops disappeared due to the funding elimination. While this would likely require additional allocation of some $10-$12 billion over five years, policy makers note that this is just returning dollars that should have been allocated according to the original PPACA. Notably, there’s already furious resistance from the big private payers as the legislation would require cross-subsidization from plans generating better-than-expected financial returns.

While the Big Three don’t like the “Zombie Co-Op” idea (they thought the idea, along with most of the plans, was dismembered, dead, and buried), they absolutely hate the alternative – a Public Option. Despite that animosity, the health plans’ huge lobbying power is likely to run up against the political reality that is the Democratic Party’s efforts to win back Congress AND keep the White House blue.

Back when PPACA was taking form, liberal Democrats in the Senate pushed very hard for a public option in each market area, claiming that the market power of the huge health plans could only be countered with a governmental plan.  As there was a considerable effort by the Dems to get at least one Republican backer (Susan Collins of ME was courted long and hard), the public option went nowhere. Unhappy with the Co-Ops offered as an alternative, liberals are also pointing out the political reality of their electorate.

Simply put, to ensure Sanders supporters turn out in the general election (forecast to be a Clinton-Trump contest), Clinton’s advisers are pushing her hard to release a “platform plank” requiring a “Medicare for All” option in every state. Clinton’s strategists are leaving no stone unturned in their effort to shift the millennials’ support from Sanders to presumptive nominee Clinton; they see this as great politics both nationally and in the contested House and Senate races as well.

As a sidelight (to some, but hugely consequential to many), it appears there’s a strong move to include coverage for occupational injuries and illnesses in “ClintonCare”. Health nerds (yes that’s me too) will recall that Ms Clinton’s stillborn healthcare reform plan incorporated workers’ comp in Title X.

The furor over opt-out, recent OSHA reports, and public scrutiny of some bad actors – along with a very favorable political environment – have made several key policy advisers revive this once-dead concept, while adding on disability coverage thru an expanded Social Security function.

Where all this leads is anyone’s guess, but the politicians involved strongly believe ClintonCare will be a very powerful tool to unite the somewhat-split party while driving GOP Congressional candidates closer to presumptive nominee Trump.

What does this mean for you?

May we live in interesting times…

Rx Drug Abuse Summit – key takeaways

I’ll keep this short.  Heading home from Atlanta and an incredibly disturbing Rx Drug Abuse Summit.  A few key takeaways.

  • The increase in the prescription opioid death toll is terrifying.  These are drugs ONLY AVAILABLE WITH A DOCTOR’S PRESCRIPTION.
  • cdc-us-overdose-deaths-2014_jr-2
  • Heroin is getting even worse – driven largely by the rampant over-prescribing of opioids.  75% of heroin users started with prescription opioids.cdc-us-overdose-deaths-2014_jr-5
  • We are making progress.  Lots of different approaches, very passionate people, truly impressive effort by the Feds.
  • There’s disagreement around the margins, but not with the central issue – opioid abuse is an unmitigated disaster.

The net is this.  There are far, far too many docs writing way more opioid scripts than they should.  Tens of thousands of people are dying, families are destroyed, kids left without parents.

You want to talk about treating pain?  

How about the pain of kids without parents, moms without daughters, sisters without brothers, communities without hope.

Who is treating their pain?

and who is causing it?

Obama, Pew, Landers and Paduda

Headed to Atlanta for Operation Unite’s fifth Rx Drug Abuse Summit, an event I’ve been privileged to participate in every year (this year Mark Pew of Prium, Michelle Landers of KEMI, and I are going to discuss formularies in work comp, an issue near and dear to my heart).

This year, President Obama is also speaking.

Think about that.

The leader of the free world is taking a day to fly down, talk, and fly back.  It’s not like the guy has nothing else on his plate – the Middle East, Apple v FBI, global warming, Congress, SCOTUS nomination of Merrick Garland, Pakistan, Iranian cyber attacks, China, trade policy…

and yet Pres. Obama a) decides to go to Atlanta; b) does the prep work necessary to speak on a panel about opioid policy, the FDA, drug approvals, law enforcement, heroin, treatment v incarceration; c) make the trip with all that entails; and d) speak on the panel.

While I’m pumped he decided to make the trip, I’m equal parts disheartened that the President of the United States has to do this.  Moreover, there’s a really impressive list of speakers; Governors, Congresspeople, the US Surgeon General, head of the FDA, Senators, head of the DEA, the CDC Director…

Those of us who’ve been up to our eyeballs in the crisis for a decade are gratified indeed to see the level of attention focused on the issue, and sad beyond measure that this has risen to the level that the President is devoting this amount of time to opioids.

What does this mean for you?

I’d suggest we focus on the positive here, as the negative is just emotionally crushing.

Opt out – the final word from the experts

Wrapping up WCRI’s opt out marathon, a four-person roundtable dove into the issue with AIA’s Bruce Wood leading off.  Bruce began with something I kept thinking during the earlier talk: what problem is opt out solving?

Work comp rates are down, no systems are in crisis, benefits are decent and in many states improving, and medical costs are, with a couple notable exceptions, not increasing too much.

Yes, there are problems in many states, some much worse than others – opioids, crappy docs, too much litigation, some outright lousy incentives that motivate bad behavior, and some bad employers, but overall, we’re doing ok.

Bruce went thru a litany of reasons opt out isn’t viable or appropriate; as one of the nation’s most knowledgeable experts on all states’ systems, he knows of what he speaks. One key point is that opt out is a federally regulated plan, therefore states can’t require financial stability or standards or minimums or audits.  Thus, even if states pass laws requiring financial standards, guarantee funds, etc, these laws will not apply to opt out.

Next up Elizabeth Bailey of Waffle House gave her views; the covered-smothered-chunked-and-served company is a non-subscriber in TX and insured thru the work comp system in OK. For those unfamiliar with WH, they sell waffles and related foodstuffs in sort of a mini-diner setting.  WH opted out in TX because the system was broken back in 2002; Bailey indicated that the lack of settlement ability and lifetime medical benefits coupled with the strength of providers made the TX WC system untenable.

That’s worked out pretty well – according to Bailey their plan features solid benefits, the ability to direct to specific medical providers, a strong focus on workplace safety have delivered much lower costs due to a dramatically lower injury rate, almost no indemnity expenses, and an overall decrease of almost 90% in costs.

My based-on-almost-no-real-knowledge-of-WH’s-program view is these folks are doing things the right way, which benefits their workers greatly – far fewer have injuries, which is the core goal of any occupational program.  And they get back to work quickly, so they don’t get stuck in a disability mindset.

Attorney Alan Pierce then weighed in; his slides were very detailed (much better for future reading than trying to follow live).  Perhaps his key point was the contention work comp is a right, not a benefit; a right owned by the employer.

Aside – Pierce’s pontification was more than a bit annoying; his attempt to denigrate the sessions and attendees by asserting that there were few/no injured workers in the audience, and therefore he, as an “injured worker advocate” was somehow uniquely qualified and special.  A physician friend and colleague noted afterwards that this was offensive indeed as there were several treating docs in attendance, all of whom likely had just as much experience “advocating” for injured workers.

Pierce made a case that opt out results in a dramatically greater cost shifting.  While I don’t agree with all the examples of potential issues, he made a reasonable case that opt out may well increase cost shifting of both medical and wage replacement expense away from the employer.

The session wrapped up with a representative from the Oklahoma Insurance Dept, James Mills.  He provided a concise overview of the program, which is regulated much more tightly than Texas’.

The key takeaway is one offered by…once again…David Deitz MD.  There just isn’t enough data, or, arguably, any data that would allow anyone to make a reasonable assessment of opt out and/or a comparison with workers’ comp.

Until and unless there is, it is difficult if not impossible to evaluate opt out.

Bill Minick – In defense of Opt Out

At the WCRI Conference, PartnerSource’s Bill Minick began his talk stating that one shouldn’t just read the language of ERISA opt-out plans but rather understand what actually happens in the real world.  I’m a bit skeptical of this, as whenever something goes wrong, it comes down to the contractual/legal language. I’ve been involved in a few contractual disputes and in every instance the interpretation of the legal agreement was the deciding factor.

Minick noted that the insurance policies issued to cover excess losses under opt-out usually contain language that provides comprehensive coverage, in direct disagreement with the limitations cited by PCI’s Trey Gillespie.  Ed. note – As these are excess loss policies they specifically address claims above a certain dollar limit, and may not cover any claims not deemed “eligible” by the employer due to their ERISA plan.

Key to the argument in favor of opt out is litigation rates and risk thereof.  

While the employer liability risk inherent in opting out of workers’ comp is certainly high, there is less litigation in opt out than in comp in Texas.  Minick asserted that litigation in TX is quite low relative to workers comp, while the risk of litigation and the potential high costs are real. Evidently there have been over 90 awards and settlements in Texas >$1 million.

He also suggested that modifying and altering current ERISA contracts to address some of the shortcomings pointed out by others can and should occur to address issues including reporting timeframes, medical benefits and coverage.

The data cited by Minick certainly supports his assertion that employers’ financial results are better under opt out than in the work comp system. However given that employers can reject claims much more readily in an opt out environment than under work comp, I’m not sure lower LT claims rates, faster RTW, or lower costs cited by Minick are comparable as the “covered incidents” may be significantly different.

Jeff Eddinger of NCCI noted that less than 1/10th of one percent employers in OK have opted out.  Gillespie opined that the legal uncertainty surrounding OK opt out has prevented the vast majority – including the largest employers who originally promoted opt-out – from electing opt out.

There was a series of other questions from several audience members, with the general sense one of skepticism towards opt out.  That’s not surprising as this is, after all, the Workers’ Compensation Research Institute annual meeting.

The final word on opt-out is coming up next…

Opt Out and work comp – the definitive report

At the 2016 WCRI Conference, several hours were devoted to opt out – what’s happening in TX and OK, variations among and between proposals to expand opt out to other states, employer views and challenges and problems and opportunities and…

No stone was left unturned.  Now, some folks think this was way too much time spent on what is a pretty small issue.  I’d suggest the exhaustive and complete review was helpful and needed, providing attendees, reporters, and you, dear reader with a source for a 360 perspective.

Trey Gillespie opened the Opt Out session with a dispassionate, thorough, and compelling demolition of the idea itself and execution thereof.

There are four different types identified by Gillespie

Tx – WC is not mandatory – so companies “opt in” to work comp

OK – qualified employers must have a benefit plan that meets specific requirements

TN – a proposed hybrid of the TX and OK models

SC – pending legislation proposes both models

Really, opt out moves occupational injury coverage from work comp to an ERISA plan – a federally-regulated benefit plan.  Gillespie identified a number of differences between ERISA and work comp; the ones I captured are below (I may well have missed others).

  • ERISA – there is no statutory or contractual entitlement to benefits
  • eligibility is based on employment status at the time of benefit – not the time of injury
  • employer decides what – if any – injuries are covered, and which employees, if any, are eligible.

Opt-out coverage commonly excludes industrial diseases caused by asbestos and silica and similar substances, along with assaults and terrorism.  It’s also much harder to “file a claim” as the reporting requirements, conditions, and limitations are much stricter than under work comp statute.

This last is key; according to NCCI, less than 20% of LT injuries were reported on the date of injury.  As opt out plans typically require immediate reporting, there’s a reasonable question as to the impact of opt out on those workers who can’t or don’t report their claim “immediately”.

There are also quite a few restrictions around the kinds and types of medical care that is covered.  Definitions such as “medically necessary” are fungible and, more disturbingly, almost all of the OK approved plans incorporate language that allows the Claims Administrator to terminate or change a previously-agreed-upon treatment plan at any point.

All in all, this makes a mockery of employers’ responsibility to make employees injured or hurt on the job whole.

More tomorrow…

More from WCRI – What happened after “reform” to states’ work comp systems?

Rather than inundate your in-box with multiple posts last week, I decided to delay posting on some of the research for a few days.  Today, WCRI’s analysis of work comp reform’s impact.

I had to listen very quickly and type even faster while listening to WCRI’s Carol Telles discussion of the impact of reform efforts in four states…as a result I probably missed most of the really good stuff.

When IL changed their Fee Schedule in 2011, medical payments per claim dropped about 19% while overall prices paid for non-hospital services dropped 27%. What’s with the discrepancy?  Did utilization or intensity of services increase to partially offset the intended 30% decrease in the fee schedule?  I might’ve missed the answer…

North Carolina also tried to reduce facility costs by changing the fee schedule from one based on charges to one based on Medicare for hospitals and Ambulatory Surgical Centers – there is a progressive decrease for services each year from 2015 to 2017, resulting in inpatient at 160% of Medicare and outpatient and ASC at 200%, with no separate billing or mar-ups for surgical implants.

In our favorite state – California – the implementation of SB 863 led to slight but significant decreases in medical payments per claim after many years of continual steady inflation. This was driven by reduction of reimbursement for ASCs from 120% of medicare to 80% effective 1/1/13, the elimination of additional reimbursement for surgical implants, and as of 1/1/14, a gradual transition to a Medicare-based FS for non-hospital providers.

Not surprisingly, ASC payments per claim decreased dramatically, dropping 24% in 2013/2014.  Imaging was also hit hard with a 23% drop, while physical medicine payments increased 28%.  This isn’t surprising as it is consistent with CMS’ desire to increase reimbursement for cognitive services.

Interestingly, the shift to the Medicare RBRVS system  resulted in a change in billing practices; the “rise in billing more complex office visits…stopped…after RBRVS transition.”

Last up was Louisiana.  State-set medical treatment guidelines were introduced five years ago, and there have been slightly fewer visits per claim after that intro.  The biggest drop was in pain management injections followed by a 5.7% drop in physical medicine (PT, OT, chiro).

The net – reform can effectively reduce cost if effectively targeted and well-designed.