Jul
12

Workers’ comp drugs – its NOT about the cost

The reaction to yesterday’s news that pharmacy costs have dropped by over a billion dollars was a bit disappointing – and missed the key takeaway.

That is – we’ve made a ton of progress, and we still have a long way to go.

Instead, some asked “where are the savings going?”, claiming employers and patients aren’t benefiting from the reduced cost.

A Kansas legislator was among those positing that question; perhaps he was unaware that Kansas employer’s premiums dropped 7.6% this year. Kansas’ results mirrored the nation’s and other states:

Of course, there are many other reasons rates and premiums are dropping across the board:

  • a nine-year long economic expansion;
  • a solid job market;
  • continued decline in claim frequency and anecdotal reports of a drop in total claim counts;
  • better control of medical costs; and
  • lots of capacity in the insurance market

are the most significant contributors.

Another critic complained that “the savings are going into insurers’ pockets.” There is some truth to that, as workers’ comp insurer profits remain at near-record levels despite the continued decrease in premiums.

(Re increased benefits for patients, that is a state regulatory issue as indemnity benefits are almost all driven by a formula involving cost-of-living benchmarks)

But the key point is this – work comp has done great work eliminating opioids – and that is wonderful news by any standard.

As CompPharma’s report details, a key driver of the drop in drug costs is lower opioid utilization. That is very good news indeed; fewer patients are getting opioids, and other reports indicate dosages and treatment duration are declining as well. Moreover, the drop in opioid usage in work comp is far greater than the overall decline in drug spend, indicating we are doing a far better job than the rest of the insurance world despite the difficulties inherent in managing drug utilization in comp (no economic levers to influence consumer behavior, few states with pharmacy network direction, widely varying regulatory environments).

For fifteen years I’ve been interviewing the people most responsible for addressing the opioid crisis in work comp. While costs are important, without exception these professionals see their job as improving patient care, reducing the risks and dangers inherent in opioid prescribing, and helping patients recover quickly.

Their relentless focus is leading to healthier patients and lower costs for employers.

We have a very long way to go. While lots of work from lots of people has helped dramatically reduce the initial (or even more problematic second) opioid script, the much tougher challenge is helping long-term opioid patients reduce and end their use of the drug.

Some payers are making solid progress; you can hear from four of them at IAIABC’s annual meeting this fall. I’ll be moderating an intensive review of how these payers are successfully helping patients reduce opioid consumption and get back to being themselves.

What does this mean for you?

Congratulations on making major differences in many patients’ lives. Now the hard work begins. 

 

 

 


Jul
11

A billion dollars and better care

Work comp drug costs have dropped by over a billion dollars over the last eight years.

What’s even better news is this has been driven largely by sharply lower opioid utilization.

The bad news is there are still far too many patients suffering from Opioid Abuse Disorder brought on by massive overprescription of opioids.

Across all 29 workers’ comp payers surveyed by CompPharma, drug costs dropped almost 10 percent last year compared to 2016. (Total US drug costs decreased last year by 2.1 percent)

The results come from our annual Survey of Prescription Drug Management in Workers’ Comp, a project now in its fifteenth year.

Payers cited clinical programs as the primary driver of lower opioid and total drug spend. A key takeaway come from payers’ views of formularies:

many respondents did NOT want to abandon their internal formularies in favor of a one-size-fits-all blanket formulary. These payers noted patients are all different, their needs evolve throughout the course of treatment and recovery, and therefore their pharmacy needs would change as well. While they were in favor of managed (state-mandated) formularies for initial fills, they want flexibility to adapt to the patient’s condition and needs without putting undue burden on the prescriber and pharmacy to comply with prior authorization requirements.

The public version of the Survey Report is available here for download; respondents received a more detailed version of the Report.

As the author of the Survey, I’d be remiss if I didn’t thank the respondents who have provided data and their views and opinions over the last 15 years. Their willingness to share their insights and perspectives has gone a long way to helping improve patient care.

I’d also note that work comp Pharmacy Benefit Managers have been largely responsible for reducing employer’s drug costs and opioid overuse. Another way to put this – PBMs have dramatically reduced their revenues by improving their customers’ and patients results.

 


Jul
9

High deductible health plans don’t work

High deductible health plans do not work.

These plans, also known as HDHPs are the bluntest of instruments, intended to make patients more cost conscious and better consumers by making them pay the first few thousand dollars of their healthcare bills.

Instead, patients avoid care they should get, go bankrupt trying to pay sky-high deductibles, and even worse, don’t do a damn thing to get high utilizers to modify their lifestyle or care decisions.

Lazy benefits managers and employers looking for a quick fix to rising premiums continue to tout HDHPs despite the warning signs. Now, over a decade after these plans first became widely popular, some employers are finally getting the message.

I’d go so far as to argue that HDHPs help drive health care costs up; sick folks get sicker because they can’t afford preventive and routine care, while the 20% of members who incur 80% of the healthcare costs blow thru their deductible in March and then have no financial inhibitions.

Research shows most of those high utilizers don’t shop for care. I don’t see this as dumb behavior, rather a result of dumb plan design. If you’ve already paid your annual out-of-pocket maximum, you have no incentive to ask what something costs or even if you need that care.

I’ve been railing about this for years…alas, with the same effectiveness as Cassandra

So, if you’re looking to benefit design to control costs, what’s a better alternative?

Simple.  Replace deductibles and copays with co-insurance.  That is, have consumers share in the actual cost.  If treatment costs $100, then the consumer pays $20; if it is $4000, then the consumer pays $800.  This will make the consumer cost conscious without breaking their bank.

I understand that this will require the consumer, provider, and health plan to know what the cost of care is, ideally before treatment.  That is another major benefit of a co-insurance based program; it will speed adoption of transparent pricing and make consumers much more discerning buyers.

Yes, keep an out of pocket limit to protect consumers.  High utilizers will feel the pain of paying co-insurance far longer than they do today.  As a result, they will be better consumers overall.

What does this mean for you?

This isn’t that complicated, nor is it difficult.  Health plans that do this will gain a competitive advantage.

 


Jun
29

Friday catch up

Happy last June Friday – going to be a blistering weekend here in upstate New York with temps likely to blast thru records.  Hope you’re cooler than we are…

Here’s a few newsworthy items that crossed my virtual desk this week.

First up – WCRI’s got the latest on perhaps the biggest cost driver in work comp medical – outpatient facility costs.

Couple quick takeaways:

  • States without fee schedules had significantly higher prices
  • States with percentage of charges fee schedules were way more costly than those with fixed fee schedules
  • Medicare’s reimbursement scheme is becoming more pervasive – my view is this is a very good thing.

Speaking of cost drivers…Health systems are buying up physician practices at a record pace. But does this make good business sense? “…some larger health systems’ physician operations are generating nine-figure operating losses, which are major contributors to the deterioration in hospital earnings. ”

Best line in a news article this week goes to the Economist; in a great article about why meetings suck.

MOST workers view the prospect of a two-hour meeting with the same enthusiasm as Prometheus awaited the daily arrival of the eagle, sent by the gods to peck at his liver.

The solution? “the best solution to tedious gatherings is to have far fewer of them.”

Excellent discussion of the Infrastructure issue – how it affects local business, why tolls should only cover operating and not capital expenses, and why Dodge City didn’t become Dallas – Forth Worth – and DFW did.

Health status is driven by many things – but perhaps the most important is food. One out of six Medicaid recipients surveyed who are working didn’t eat anything for the entire day. Details here.

In the Road-To-Hell-Is-Paved-With-Good-Intentions department, we bring you Medicaid work requirements; they make sense, right? Well, most of the recipients who would lose coverage are actually working today – but they’d be kicked out due to the administrative hassles of complying with reporting requirements.

Prescription Drug Monitoring Programs  – when effectively and intelligently implemented – are associated with reduced opioid prescribing. The best results appear to come from Kentucky…

Ok, time to get to work.

Don’t forget the sunscreen, eh?

 


Jun
27

The trade “war” and workers’ comp

Responding to the European Union’s new import tariffs, Harley Davidson will be shifting some production from American factories to its plants in Brazil, India, and Thailand in an effort to keep it’s bikes affordable.

A store in Paris

Motorcycles aren’t the only US product suffering from the not-quite-yet-a-trade war. Orange juice, cranberry juice, peanut butter, bourbon, tobacco products, steel, jeans, and playing cards are among those that are incurring at least 25% import duties.

Farmers and those in the “food chain” may be the next to feel the pain. In response to Trump’s tariffs, Beijing has said that it will retaliate by imposing duties of fifteen per cent on a wide range of American foodstuffs, According to the New Yorker the products affected include: “soybeans, cashews, almonds, apricots, strawberries, and other fruits. Pork products, which are very popular in China, would be hit with a tariff of twenty-five per cent.”

Harley-Davidson’s move was driven by the European Union’s increase of import duties, aka tariffs by 25%. This was in response to President Trump’s higher import duties on certain EU products.  With the new EU tariff raising prices by an average of $2200 per bike, HD management is now eating the losses in order to keep market share in Europe until the company can ramp up production overseas; this quote from HD is from The New Yorker:

“Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe,”

Farm products have already been hit by trade war fears; corn and soybean futures are at a two-year low. While there’s a lot driving those prices, the short-term outlook for farmers, wholesalers, farm-equipment manufacturers and others in the ag value chain are not good.

China buys over $20 billion of US agricultural products every year, and is moving to buy more from Brazil and other countries as US goods will be much more expensive with the import duties.

Our neighbor has 1300 acres of soybeans and corn, so this is pretty real to us.

One company that’s getting hit from both sides in this trade thing is John Deere. The company’s steel prices are up while future demand for its products – both here and overseas – is in doubt. According to one analyst,

Deere & Company could end up seeing years of depressed US agricultural sales, because it may take farming households years to recover financially.

So, what does this have to do with workers’ comp?

Insurers and employers are enjoying the latest in a string of really, really good years. 2017’s combined ratio was a stellar 89, the best result we’ve seen in two decades. While premiums were down marginally last year, the pre-tax operating margin hit 23 percent, a level we haven’t seen in recent memory.

All this really really good news has been driven by a nine-year long recovery, a continuation in the structural decrease in claim frequency (and likely total claims), and relatively low medical inflation.

The very strong labor market helps a lot; re-employing injured workers is a lot easier when there are lots of job openings and employers work really hard to get injured workers back on the job to meet demand.

One would do well to remember what happens when good things come to an end. Claims jump up, possibly driven by workers scared of layoffs deciding to report that nagging pain. Employers stop hiring, afraid to be stuck with lots of idle workers when demand drops off.

If the current trade conflict gets any more heated, we’re headed for a nasty trade war, one that will have deep and lasting effects on every sector from steel to transport to agriculture to tourism.

What does this mean for you?

Trade wars will hurt the economy and hammer workers’ comp insurers. Companies serving the claims sector may well see an uptick as claim frequency and claim duration increase.

 

 


Jun
25

HWR’s Midsummer Nights edition is up

Thanks to the estimable Hank Stern, we bring you the June edition of Health Wonk Review, a fast read of the latest intel on health policy and related matters.

Hank’s summary includes notes on the CVS’ donation kerfuffle; a very readable review of the Trump Administration’s Association Health Plans plans; what may happen if the Trump folks kill off ACA; and how Medicare might be expanded.

Read on!


Jun
22

After a spate of mega-deals and “tuck-in” acquisitions, things seemed to have calmed down in work comp services M&A.

In reality, there’s a lot going on – for reasons I’m not sure make sense.

There’s been consolidation throughout work comp services; every niche from pharmacy management to MSA vendors to networks to IME firms to case management to TPAs has gone thru this. There’s been both vertical (companies in the same business merging (e.g. EXAM buying IME companies) and horizontal deals (companies in dissimilar areas joining forces (e.g. Mitchell buying MCN).

While your take on this depends on where you sit, (e.g. fewer vendors bidding on a payer’s business), there’s another, arguably more important issue here.

I’m going to caution buyers to not conflate scarcity with value.

I’m seeing renewed enthusiasm among both strategic and financial buyers in companies that weren’t that exciting just a couple of years ago. Those heretofore-not-exciting companies seem to have gotten much more attractive now that there are far fewer potential acquisition targets available.

This is just human nature; we tend to value things more when there are few of them.

For example, I give you the Ford Pinto…

A horrifically crappy car rushed into production during the gas crises of the early seventies, thankfully there are few left in circulation.

Even worse, the AMC Gremlin (why a company would name a product after a manufacturing defect is one of the great mysteries of the Universe).

Yet people still spend stupid money on Pintos and Gremlins

Why? because there are few of them left. That doesn’t make these awful examples of design and engineering incompetence any better, it doesn’t make the build quality less than horrific, and it sure doesn’t make them any more visually attractive.

What does this mean for you?

Before you plunk down your (or your investors’) hard earned cash on some company you passed on or wouldn’t have given a second look at a few years ago, you may want to ask if it passes the Gremlin Test.


Jun
21

Why we’re not solving opioid addiction

The reason opioid abuse disorder (OAD) is such a huge problem is because no one’s figured out how to a) fix it while b) making a shipload of money.

Sure, there are “solutions” that address bits and pieces including:

  • urine drug testing identifies patients who aren’t taking prescribed drugs and/or are taking other licit or illicit medications;
  • Medication Assisted Therapy (MAT) can and does help many wean off opioids without going thru withdrawal;
  • inpatient or outpatient detox is essential for some OAD patients;
  • physical therapy and exercise is helpful for many; and
  • cognitive behavioral therapy (CBT) is essential for many patients.

But many patients require many of these services, while some do fine with one or two.

There is no single silver bullet.

What we aren’t doing is funding community-based treatment facilities and providers. This is essential because OAD is a long-term chronic disease, and patients need follow up and support for years.

The real issue is three-fold – treating OAD usually requires dealing with the patient’s chronic pain as well; OAD is a lifetime disorder; and every patient is different.

The terror of withdrawal coupled with the dread of chronic pain is hugely difficult to overcome. Patients are justifiably terrified of both, and this fear must be addressed throughout the treatment process. This is a long-term process likely involving different treatment modalities delivered by diverse providers.

Some patients respond to MAT, others do not. Some have family support systems, others are pretty much on their own. Some respond to PT and exercise, others are too afraid the effort will trigger a resurgence of pain. And the only way to find out what works for Patient X is to keep trying different approaches, providers, modalities until you find something that works.

No one has cracked the code, come up with a set process, solution or approach that works for most patients. Until someone figures out how to make gazillions fixing people with substance abuse disorder, I don’t expect the nation will make real progress.

That does NOT mean there aren’t real successes happening every day.

California’s State Fund is one of the leaders, delivering remarkable results through a careful, methodical approach.

Here’s the key – OAD can be a lifetime issue. Do not fear this, rather accept it as reality. It’s far easier to throw one’s hands up at the difficulty of it all rather than dig in and get going, but it’s also what led to hundreds of thousands of workers comp patients with OAD.

What does this mean for you?

Those who are in it for the long haul are going to be the difference makers.


Jun
19

Roads to stability

After eight days with family in Tuscany, it’s back to work.

Before we dive into the mundane, an observation from my travels.

This is a road built by the Romans about 2000 years ago. It’s still pretty functional, as were most of the ones we rode on in the hills and valleys of Tuscany. Sure, it could be smoother and a bit less steep (or a LOT less steep) in places, but it’s still there.

The Romans built these by hand, with nothing but human and animal power, with no electronics or computers or drones or satellite or engineering apps, no internal combustion or hydraulics or steam- or coal- powered machines. And they’re still here.

The Romans built these roads to speed communications, trade, and security. The labor that built these roads was drawn from the poor in the cities, local farms and landowners.

Somehow, that bumpy, narrow road of stones buried in the dirt eons ago felt a lot more…reliable.

All those opioid bills in Congress

Now we know why Congress can’t get anything done – At last count there were about 30 opioid-related bills in various stages in the House or Senate – over 20 have actually been passed by the House. One of the bills that addresses the Institutions for Mental Diseases is pretty contentious.

According to the Washington Post, the “IMD exclusion”  prohibits federal Medicaid reimbursements for inpatient treatment centers with more than 16 beds whose patients are mainly suffering from severe mental illness. The House bill would lift the exclusion for treatment of opioid addiction- but ONLY opioid addiction.

This ignores the very real and pervasive nature of other-substance addiction that has long plagued poor rural, minority and inner-city populations – crystal meth is just one example.

Why we’d pass a bill that doesn’t address crystal meth, which is a disaster in many rural communities from Maine to Arizona, is beyond me.

But there’s another issue here that’s even more troubling; this bill ignores the real problem; community-based treatment has always been starved for funds, unable to help millions of people who endlessly wait their turn for treatment.

Experts believe we need north of $10 billion per year to make a real impact on substance abuse disorder

Fact is, many with substance abuse disorder want to get treatment – there just isn’t any available. And allowing Medicaid to spend billions on care delivered in large institutions sounds a lot like a hand-out of taxpayer dollars to big business-owned “treatment” centers.

The IMD exclusion repeal is just window-dressing, a way for politicians to claim they’re doing something while handing billions to an industry with really good lobbying.

What does this mean for you?

The Romans built very expensive and very solid, stable, and durable roads that led to the long-term survival and success of the Empire.

We give truckloads of taxpayer dollars to big business while ignoring the devastation of the rural and inner-city poor.

Where will our decision lead us?

 


Jun
6

What do these acquisitions mean?

Two just-announced acquisitions are an indicator of where things are in today’s work comp services world.

Tech firm Mitchell (recently bought by Stone Point (!) thanks for correcting me JT!) will acquire IME and peer review firm MCN.  Based in Seattle, privately-held MCN is one of the larger independent firms in that space, has a national network of 13,000 physician reviewers and a solid customer list. Brian Grant MD founded the company 30+ years ago and built it into a firm serving the auto, comp, and disability insurance industries.

This deal adds depth to Mitchell’s already-extensive utilization review/peer review offering, and adds cross-selling opportunities that should help the company compete with Examworks.

Strategically, the acquisition both broadens Mitchell’s non-bill review business and strengthens its offerings outside the auto casualty space, changes that lessen Mitchell’s reliance on auto and work comp review.  Given the long-term uncertainty about those businesses, the transaction makes sense – especially if the company focuses on disability, a space not subject to the impact of autonomous vehicles and the structural decline in work comp claim frequency.

One source indicates the price was in the 12x earnings range; that could not be independently verified.

In an unrelated transaction, TPA SUNZ bought case management firm Ascential Care in a deal announced on WorkCompWire this morning.  SUNZ sells high-deductible work comp plans to professional employer organizations (PEOs), staffing companies and larger employers.

I’d expect Ascential’s case management to be more tightly integrated with SUNZ’ claims management processes. Employers with loss-sensitive plans almost always buy into proactive, rapid use of clinical staff when claims arise. Getting case managers involved – when appropriate – can avoid problems and help patients feel like their employer is working to help them recover.

Ascential CEO Rich Leonardo is staying on and will continue to lead the business and SUNZ is investing in more staff to meet client needs.

Takeaway

For the umpteenth time time, workers’ comp is a very mature industry (as is auto).  Service companies looking to grow have to either:

  • take share from competitors;
  • buy other, similar businesses;
  • buy related businesses; or
  • expand into other markets.

Mitchell is growing by acquisition, adding more depth to its current medical management operation.  SUNZ is capturing more of the services delivered to current customers, thereby keeping those dollars inhouse.

What does this mean for you?

If you want to grow, see above. If that’s going to be hard to do, think about who may want to buy you.