Oct
11

Mutual Admiration Society

Normally, I am more comfortable calling attention to the issues rather than to myself… but I would be remiss in not thanking the IAIABC for their recent recognition of my efforts to address opioid overuse and physician dispensing in workers’ comp. I am quite honored to find myself in such an esteemed roster of industry professionals: to be mentioned in the same breath as Kathryn Mueller MD is humbling.

This is a good opportunity for me to tout IAIABC  because it’s a mutual admiration society; they do great work.

If you aren’t following their efforts, you need to be.

As the world’s oldest trade association dedicated to promoting the advancement of workers’ compensation systems throughout the world through education, research, and resource management, IAIABC has a distinguished history. The folks at IAIABC, and the stakeholders that do much of their work, spend untold hours working thru issues as mundane – and vitally important – as standards for electronic billing, the selection and deployment of medical treatment guidelines, and model regulations addressing the many arcane, esoteric, but nonetheless critical issues that make up workers compensation.

Regulators are a lot like sports officials – when things run smoothly you don’t even know they’re there.  But when they don’t, you get..the recent disaster known as the NFL.

Now that the “real” officials are back on the football field, we all know how good they are.

Let’s see if we can do the same for workers comp; as complex and complicated as it is, in many states it actually runs pretty well.

And if it isn’t, you can find a group at IAIABC working on a solution.


Oct
10

Meningitis, compounding pharmacies, and workers’ comp

There’s one good thing coming out of the horrific and rising death toll from possibly-contaminated drugs produced by a small drug compounding firm.  There’s nothing like a few deaths to concentrate the attention of policy makers. 

If that sounds heartless and cruel, it is nonetheless quite true.

Much more attention will now be paid to the practice of compounding, bringing much-needed focus on the very real dangers inherent in the practice.  To date, a dozen people have died as a result of the tainted drug, but the count may well increase: thirteen thousand people received the injections. Experts believe about 650 individuals will end up infected, up from 121 today.

Roberto Ceniceros reported that many of the facilities using the tainted drug treat workers comp patients. 

The reality is compounding is not tightly regulated; the FDA is responsible for ingredients but individual states handle manufacturing and oversight.  That’s not for a lack of trying; the FDA has repeatedly tried to increase its oversight of compounders, only to see those efforts blocked by compounders’ lobbyists.  (side note – think of this when you listen to politicians ranting about regulatory burdens).

The meningitis outbreak is only the latest in a string of what the FDA reports is 200 “adverse events” associated with 71 compounded drugs, one of which blinded two veterans at a VA facility.  Back in 2009, Dan Reynolds of Risk and Insurance wrote an extensive article on the problems with compounding, citing experts from PBM HealtheSystems.

Implications for workers’ comp

1.  The drug in question was typically injected into the back to relieve back pain.  The procedure, known as an epidural steroid injection, is all too common in workers’ comp.  It is highly likely that some of the victims were comp claimants.  Here’s hoping the insurers for the victim(s) vigorously pursue legal action against the compounder.

2.  As CWCI, WCRI, and others have reported, compounding is growing in workers comp.  There’s been a significant increase in California since the Golden State slapped controls on over-charging for repackaged drugs, one theory is the profiteers looked for another place to suck money out of the system. Hopefully regulators and legislators will now have the impetus they need to blow thru compounders’ lobbyists and put stronger controls on the practice.  


Oct
9

How profitable is the physician dispensing business?

This profitable.

That’s Gerry Glass on the left and Paul Zimmerman on the right, co-CEOS of Automated Healthcare Solutions

The two bought the jet, which is registered under the name “Boys from Dover”, back in May of 2010.  Other pictures are here and here.

The jet is a 1988 Cessna Citation III; similar planes go for upwards of a million bucks these days; hard to say what the “Boys” paid for their’s.  Of course, you gotta figure maintenance, fuel, pilot, hangarage, insurance, upgrades…

Hangarage runs about $40,000 per year

Insurance about $30,000.

Pilot, co-pilot, and flight attendant about $425,000.

Landing fees and associated charges – $20,000.

Cleaning should be $6000 or so.

We’ll lump the other operating costs – fuel, maintenance, upkeep repair and replacement of parts – into Direct Operating Cost – which is about $2,370 per hour, or, figuring average usage, $948,000 per year.

Total cost per year?  Hey, if you have to ask, you can’t afford it.  And after paying the inflated costs for physician dispensed drugs, you probably can’t.

But since you asked, it is just under $1.5 million per year.

On a possibly not-related topic, check your TIN data and see how many dollars have gone to Prescription Partners, affiliate of AHCS, which is also owned partially by the “Boys”.  

I know what you’re thinking…there are two “Boys”, so what if one wants to go to, say, Baltimore to appear at a hearing, and the other is headed out on vacation.  What’s to do? Well, no worries!  They’ll just flip a coin, and the loser takes the other plane -a Cessna 500.

Sure, it’s slower, and smaller, and can’t go as far, but hey! any private jet is better than flying commersh!

 


Oct
8

Florida’s failing drug program

WorkCompCentral’s Mike Whiteley reported this morning that Florida’s Prescription Drug Management Program (PDMP) is in danger of running out of money [sub req], just over a year after it got started, leaving doctors and dispensers with no way to monitor their patients’ access to  powerful, potentially addictive drugs.

PDMPs collect data on prescriptions for controlled substances from doctors and pharmacies, allowing both to access the database to find out if patients are getting conflicting, duplicate, or otherwise problematic scripts.

There are two main reasons for this debacle; Governor Rick Scott’s unfathomable decision to refuse state funding for the PDMP, and the incompetence and lack of diligence exhibited by and the chairman of the Florida PDMP foundation.

Scott rejected state funding for the PDMP, despite overwhelming evidence that Florida’s drug abuse problem was – by far – the worst in the nation.  As a result, the PDMP requires a mix of Federal and private funding to maintain its operations; according to Whiteley’s piece, there’s significant risk this isn’t going to be enough to keep the program functioning for much longer.

The chairman of the PDMP Foundation – responsible for funding the PDMP – is none other than Dave Bowen, president of physician dispensing company Automated Healthcare Solutions.  Evidently Bowen has been so busy spending millions lobbying Florida’s legislators to keep open the loophole that has AHCS rolling in cash he hasn’t had time to ensure the PDMP is adequately funded.  This despite his boss’s statement that “Information provided by the PDMP will be a powerful tool to make sure medication gets into the hands of people who truly need it…”

Well.

PDMPs aren’t intended to “ensure medication gets into the hands of people who truly need it…”; perhaps that’s the problem.  They are specifically intended to “reduce prescription drug abuse and diversion”; at least that’s what Bowen’s own Florida PDMP Foundation says they are supposed to do.  Those are very different goals; adherence to prescription drug treatment is quite different from making sure patients aren’t going to multiple docs and multiple pharmacies.  

According to Bowen’s PDMP Foundation website, there are calls scheduled each month; however – according to that same website – there are only notes for four calls so far this year, and none documented since June.  The website itself indicates funding is only assured thru June of 2011…

The opioid disaster has hit Florida as hard as any state. The PDMP is one tool that can go a long way to addressing the problem.  It is a travesty that a) the state can’t find less than a million bucks a year to fund the PDMP and b) the ostensible leader of the Foundation, one so committed to the PDMP somehow can’t find time to meet, much less actually get the program funded.

Note – this post was altered after Alia FarajJohnson, AHCS’ PR flack, complained that she’d been misquoted in the piece by Mike Whiteley.  I removed her quote.


Oct
5

Maryland’s medical miscreants coming to justice

The group of five Maryland physicians charged with inappropriate prescribing are getting their day in court – or rather, the court is getting their day with the docs.  

According to an article [sub req] in the Daily Record, “IWIF [Maryland state work comp fund] said an internal audit of prescription payments showed that from 2001 to 2006, the annual reimbursement fees for prescriptions at Maryland Orthopedics jumped nearly 1,700 percent, going from $12,489 to $212,170 over the 5-year period.”

As I reported a couple weeks back, “One physician, Raymond Drapkin MD allegedly administered pain injections and simultaneously prescribed – and dispensed – significant quantities of narcotics to patients.  One of Drapkin’s colleagues, Michael Franchetti MD, stands accused of the same type of inappropriate behavior, as do three other docs in the practice.”  Franchetti was the first of the (allegedly) Fraudulent Five to have a settlement hearing; word is he appeared at a settlement hearing in late August. Results are supposed to be released prior to 10/13 when one of the trials starts.

Word is two of Franchett’s colleagues are “going down swinging” while others are settling out.

A colleague was kind enough to provide insights into what the docs were doing with all the cash they were getting from dispensing, injecting, and allegedly over-treating.  Just shows that money does NOT equal good taste…

Can’t see the cement lions at the entrance from here…

 


Oct
4

Private equity’s interest in workers’ comp – more to come

The pace of activity in the private equity world has picked up – dramatically.  Driven by lots of dollars sitting in investment funds ready to be deployed, the wind-down of multiple current investment funds, likely changes to the tax code, more private equity firms digging into the workers comp services sector, and the desire of current owners to cash in, there is more activity today than I’ve seen in 20+ years.

I’m not just talking about recent deals – Healthcare Solutions’ acquisition of ScripNet; Odyssey’s purchase of MSC (they already own OneCall Medical), the Align Networks/Universal Smartcomp ‘merger’.  There are more on the way, deals large and small currently “in the process’ with at least one likely to rival the MSC acquisition – any that’s only the ones I’m aware of.

There is a larger, ‘macro’ factor driving the activity.

There will be some wrenching changes in the broader health care sector coming in the next two to three years.  It is very, very difficult to predict what’s going to fall out, much less who’s got the right business model to flourish in the brave new world of post-reform health care.

In contrast, workers comp is a pretty stable, solid, non-dynamic business.  Sure there are state-specific changes – rates up and down, coverage changes, revised fee schedules and the like.  But even a big change in the largest state (California) only affects 15% of the market.  Contrast that with the fallout from Medicare’s refusal to continue paying for hospital readmissions  – a change estimated to result in billions in savings for taxpayers and lower revenues for hospitals – and the inherent stability of workers comp becomes apparent.

Investors like stable environments, and if they’ve got to invest somewhere, they’d prefer a sector that’s stable to one that is most definitely not.

And work comp is stable.

I’d expect the level of interest in the comp services industry to stay pretty high for the next couple of quarters – if not longer.  Not only will these external and macro-factors drive activity, the very level of activity will beget more interest from more investors, all looking to find out if they’re missing something.

After all, if lots of smart folks are buying into comp, there must be something to it.


Oct
2

Kudos to Miami-Dade Schools for saying no to repackagers

For refusing to pay the massive markups on physician-dispensed repackaged drugs for workers comp claimants.

The move saved MD over half a million dollars, money desperately needed for teachers and teaching aides.

The news was reported in this morning’s WorkCompCentral by Mike Whiteley.  Whiteley also cited a new report by NCCI that indicates employers’ moves to refuse to pay the inflated costs have helped reduce their costs significantly.  Taking advantage of a statutory provision, payers are able to reprice the bills to the same amount they would have paid had the script come from a retail pharmacy.

This strategy has dramatically reduced drug costs for employers, and was deemed by NCCI to be a significant reason for the reduction in cost from NCCI’s estimate based on 2009 data.

Of course, AHCS (the large and strident proponent of physician dispensing) said they were looking at the report, but “the numbers are jumping around and don’t represent the $62 million in savings that NCCI had predicted.”

I suppose it would be too much to expect AHCS would be able to understand that things change from year to year and the outrageous costs of physician dispensing have forced employers to take actions into their own hands when legislators would not do the right thing.

Understanding data appears to be an issue there; in a meeting at IAIABC’s annual meeting this morning in Newport RI, Gary Kelman MD, an AHCS employee, claimed he treated 500,000 patients over his 30 year career.

I’ll save you the calculation – that’s 83 patients per workday, 52 weeks a year for 30 years.  83 NEW patients…

Busy man. 


Sep
28

ABRY’s investments in work comp; what am I missing?

This is a pretty simple question.  How is it that an investment firm owns stakes in a TPA, MSA company, subrogation firm – and a physician dispensing and billing company?

That’s the question I’ve tried to ask folks at ABRY Partners in the past, but they’ve never seen fit to return my calls.

Don’t they know that their TPA’s (York Risk Services) clients are being hammered by physician dispensing, paying millions more for drugs and driving up their loss costs?

Has it occurred to them that their MSA company’s (Gould and Lamb) settlement estimates are directly, and in some cases dramatically, affected by physician dispensing?

Is it not ironic that one of their investments (Trover Solutions) seeks to recover dollars spent in error or inadvertently, while another (Automated Healthcare Solutions) actually increases employers’ costs? 

Physician dispensing companies make lots of money charging employers and taxpayers outrageous amounts for drugs. That is so well-known as to be common knowledge.  And no, there’s no data that outcomes are better, but there is growing evidence that medical costs are higher and claimants are out of work longer when they get drugs from their docs.

Claims administrators flourish by controlling their employer clients’ workers comp costs. They do battle day in and day out with physician dispensers and their allies, striving to keep medical costs down while ensuring claimants get the drugs they need.  York is, by all accounts, a very good TPA, one that is doing all the right things on behalf of their employer clients. (disclosure – I’ve done work with York in the past, and have been universally impressed with their people, their focus, and their dedication to doing the right thing)

Yet in many states, employers’ workers comp costs are significantly higher than they should be, due to the massively higher prices for physician-dispensed drugs.

Medicare Set-Aside firms: “forecast future medical exposure and establish a medically accurate basis on which to set reserves for workers’ compensation and liability files or claims with limited medical records. By accurately forecasting future medical exposure, [the future medical care plan] becomes an invaluable negotiation tool for mediation and settlement.” (from Gould and Lamb’s website)

Obviously, the higher the drug cost, the higher the costs for the future medical care plan.  That’s not to say Gould and Lamb – or any other MSA firm – benefits from increasing their estimate of future medical costs.  They most certainly don’t.

With that said, there’s no question AHCS, and by extension ABRY, do benefit – a lot – by increasing claimants’ drug costs.

Another ABRY investment, Trover Solutions, Inc., is in the business of recovering claims dollars through subrogation; they’ve been in the P&C industry since 2000.  One wonders if their software, Troveris, is able to identify bills paid to AHCS for drugs in Florida, where some payers are finding success in denying physician dispensers’ high billed charges and repricing the bill to the same rate charged by their retail pharmacy networks for the same drug.

Given the recent report by WCRI that almost two-thirds of Florida’s work comp drug costs are from physician dispensed drugs, there may be an opportunity here for Trover.

I get that investment firms are in business to make money.  So am I, and there’s a very good chance you are too.  That’s fine.

But I’m puzzled by ABRY’s investment decisions.  What’s to think about an investment firm that owns businesses with apparently conflicting business goals?