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?


Sep
26

Physicians charged with inappropriate dispensing

Five Maryland orthopedic surgeons may lose their medical licenses after being charged with “suspect” billing practices including overcharging the state’s work comp fund for medications dispensed by the docs.

The five are all members of Maryland Orthopedics P.A.

One physician, Raymond Drabkin MD allegedly administered pain injections and simultaneously prescribed – and dispensed – significant quantities of narcotics to patients.  One of Drabkin’s colleagues, Michael Franchetti MD, stands accused of the same type of inappropriate behavior, as do three other docs in the practice.

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.”

IWIF’s complaint to the state resulted in charges brought against all five physicians.  While the current status of the case is not known, a hearing before an administrative law judge was scheduled for last month.

What does this mean for you?

There are things payers can do when confronted by poor medical care delivered by physicians who appear more interested in their financial health than their patients’ well being.


Sep
24

Medical coding driving costs up

A post last week addressed the influence of medical coding changes on billing practices and costs – net was providers are being paid more due to more sophisticated coding.

The care isn’t different, the patients aren’t sicker, it’s just the way the providers are coding their services.

Th NYTimes just published a piece that provides a lot more detail on the issue.  Here are a few of the findings of their rather extensive analysis.

– Hospitals received $1 billion more in Medicare reimbursements in 2010 than they did five years earlier, at least in part by changing the billing codes they assign to patients in emergency rooms

– 1,700 of the more than 440,000 doctors in the country — cost Medicare as much as $100 million in 2010 alone, federal regulators said in a recent report, noting that the largest share of those doctors specialized in family practice, internal medicine and emergency care.

There are two drivers behind the issue – for hospitals it is CMS’ switch to MS-DRGs from DRGS a couple years back.  By adjusting reimbursement based on severity, the new payment methodology encouraged hospitals to more accurately, or as some would suggest – more creatively code and bill.  CMS determined total costs went up around four percent due to the change, so they reduced reimbursements by about the same amount.

The other driver is CMS’ ongoing effort to get physicians to use electronic medical records (EMR).  While this will drive administrative costs down and provide much more accurate data for analysis and development of outcomes data, over the near term EMR vendors are selling their software in part on its ability to increase billing and reimbursement. As the NYT reported, “In an online demonstration, one vendor, Praxis EMR, promises that it “plays the level-of-service game on your behalf and beats them at their own game using their own rules.”

That’s not exactly…consistent with what actually happens. Turns out that some of these applications allow docs to simply check boxes indicating services were delivered without verifying the services actually WERE delivered.

As a result, payers – and yes, that includes you – are getting bills for services that did not occur.

So, what do you do about it?

First, look at your data to identify the providers whose billing has changed significantly at some point over the last couple years. Next, identify that inflection point, and find out if that occurred when they changed billing software/vendors. Third, look carefully at a few of the providers’ bills before and after the inflection point, figure out what’s happened, and then sit back and discuss next steps.

These could include:

  • call to the provider asking what’s going on
  • claim file audit
  • referral to internal fraud and abuse
  • onsite visit to provider
  • flagging of provider’s future bills for special review

Sep
20

Montana’s making progress

In Montana this week to deliver the keynote at the annual Governor’s Workers Comp Conference and get in a good bit of hiking in the mountains around Big Sky as well.

Truth be told, I hadn’t been tracking goings-on in the Big Sky state’s workers comp system, but in prepping for the conference, I learned a good deal.

MT has some state-specific challenges; doctors can be few and far between in many areas, making direction of care a significant challenge.  The culture is very labor-friendly which can lead to courts confusing over-treatment with good care. The growth in the energy sector in eastern Montana is adding jobs with potential for higher-severity injuries.

Then there are the similarities; the over-prescribing of opioids is likely as big a problem here as in most states.

Over the last couple years, a lot of progress has been made:

– hired a Medical Director for the Department of Labor and Industry’s Workplace Relations Division (equivalent to the work comp division in other states)

developed and implemented medical treatment guidelines based on a combination of Colorado and ACOEM

– enabled employer direction of injured workers to specific physicians

– allowed payers to close some claims after sixty months (there’s a lot of detail here, but suffice it to say this was a big problem in MT)

While it is still too early to fully understand the impact of these changes, there’s no doubt these reforms will help improve care while reducing employers’ and taxpayers’ costs.

And Montana has been smart enough to ban physician dispensing of drugs to patients, a prescient stance that has protected injured workers, employers, and taxpayers from the “let’s see how we can soak employers for as much money as possible while pretending we’re all about patient care” set.