Author: Joe Paduda

Jul
17

Friday’s here!

Posted by Joe Paduda on Friday, July 17th, 2015 | Comments

And you get to start the weekend early (we hope).

While you were focused on other stuff – like work – here’s what else was going on in our little world.

Fraud – two very different views.

This morning’s WorkCompWire arrived with the news that some small businesses are concerned that their employees may be contemplating workers comp fraud.  In a survey sponsored by EMPLOYERS Insurance, 13% of respondents were concerned “employees would commit workers’ compensation fraud by faking an injury or illness in order to collect benefits.”

(according to EMPLOYERS, 6% were very concerned, 7% somewhat concerned)

The other fraud-related topic comes from WorkCompCentral’s Sherri Okamoto. Ms Okamoto filed a story on the Labor Dept.’s just-published finding on employee misclassification.  In the announcement by DOL, the following statement appeared:

A worker who is economically dependent on an employer is suffered or permitted to work by the employer. Thus, applying the economic realities test in view of the expansive definition of “employ” under the Act, most workers are employees under the FLSA.

WCC’s piece noted several recent court cases, rulings, and other findings that have forced employers to pay back wages, re-classify workers as employees, and otherwise restricted businesses’ efforts to avoid identifying workers as contractors.

The implications for health and workers’ comp insurers are clear: more premiums and a larger market.

Note – DoL’s document is well worth the read as it is highly relevant to the evolving “sharing economy”.

Implementing health reform

Following up on my piece re “there is no Obamacare”, found this from Avalere Health;

the average provider networks for plans offered on the health insurance exchanges created by the Affordable Care Act (ACA) include 34 percent fewer providers than the average commercial plan offered outside the exchange.

No one should be surprised by this.  Health plans competing on exchanges MUST be price competitive; now that healthplans can’t just deny coverage, they have to compete on the basis of delivering care at the lowest possible cost (yeah, outcomes will be a factor at some point, but they really aren’t so far).  The cost of care is determined in large part by provider reimbursement and utilization of health care services, both of which are driven by the payer-provider contract.  Providers want more volume, lower administrative burdens, less uncertainty about and much speedier reimbursement – and do NOT want to share patients with every other Dr Tom, Dr Dick, and Dr Mary in their service area.

And that’s why we have narrow networks on exchanges – providers give lower prices in return for more patients and less hassle.

BTW, this is right where we were back in the heyday of group- and staff-model HMOs; they fell out of favor as members wanted more choice.  Now, those people who want choice are going to have to pay a lot more for it.

Expect to see much more “network narrowing” in the future.

Another state is going to expand Medicaid – Alaska.

Providers are getting stronger

This week’s announcement that Connecticut-based Yale-New Haven health system is acquiring another big hospital in the eastern part of the state is just one more indication that the provider world is consolidating and gaining negotiating leverage.  Both health care providers and the payer industry are consolidating, but to date it appears the providers are the ones gaining the upper hand in the battle for leverage.

See you next week

Jul
16

Drug testing explained – part 2

Posted by Joe Paduda on Thursday, July 16th, 2015 | Comments

Yesterday’s post about testing work comp patients for opioids struck several nerves; perhaps the most sensitive involves frustration on the part of payers unhappy about paying for tests prescribed by docs who don’t read the results.

That and the outrageous prices charged – and paid – in some states by some labs/physicians.

In addition to several public commenters, I heard from two medical directors yesterday about docs who order tests and never take action when the results are “inconsistent” with expectations.  Over the last few weeks I’ve have had similar conversations with pharmacy directors at two large state funds.  Simply put, these folks are happy to promote best practices, but do NOT want to pay for tests that are never read.

What’s a payer to do?

First, watch the coding and reimbursement very carefully; your medical bill review function may be able to help identify inappropriate coding and/or coding that looks to be primarily reimbursement-driven.

Second, direct away from those providers engaged in unacceptable billing practices.  Yes, I understand you cannot force claimants to use or not use specific providers in some states.  I also know payers can encourage/recommend/channel/suggest/educate claimants about specific providers; Express Scripts had some solid results by educating patients about physician dispensing, and their lessons learned can inform your approach.

Third, make the high billers’ lives difficult by doing everything possible to reduce reimbursement; require medical necessity statements, require evidence that the test was actually done, reduce reimbursement by whatever legal means necessary.  I’ve talked to a couple payers who have successfully battled physician dispensers using this tactic; one roundtabled the issue with adjusters who came up with several very creative and effective ways to make life extremely difficult for companies billing for physician-dispensed drugs.

And the adjusters really enjoyed it…

For docs who don’t read the tests they have ordered, an outreach program wherein a test with aberrant findings triggers a case manager contact with the treating physician is in place at several payers.  While this – like everything else in workers’ comp – is no panacea, it does alert the treating doc that there’s a problem.

There is also technology available and currently in use that can determine if a document emailed to a recipient is opened.

Worst case, the payer can use this information if the claim goes to litigation, and/or to seek a change in physician, and/or to demonstrate culpability on the part of the physician if the patient has an adverse event.

What does this mean for you?

Drug tests are a tool; used correctly they can be very helpful.  But tests that are bought and never used are a waste of money. And using the wrong test is like trying to tighten a bolt with a hammer.

Jul
15

Drug testing (partially) explained

Posted by Joe Paduda on Wednesday, July 15th, 2015 | Comments

Once more we will delve into the minutiae of an issue…this time into testing patients who are prescribed opioids to ascertain if they are taking the prescribed medications, and if there is evidence they are consuming other licit and/or illicit drugs.

(full disclosure – Millennium Health, the largest toxicology testing company, is a consulting client)

All guidelines suggest/encourage/require testing of patients prescribed opioids.  

There are two types of urine drug tests – qualitative, where a cup test simply indicates if a drug is or is not present, and quantitative, which is much more accurate and must be done in a lab.

I’m surprised at the continued use of qualitative tests as they are notoriously unreliable; research indicates the cup test failed to show benzodiazepines were present for 28% of specimens, and cocaine for fully half of specimens evaluated – and false negatives and positives for other drugs are much higher than one would expect.  These “false negatives” are obviously misleading; the usefulness of cup tests is further compromised by how easy they are to fool. (there are about a gazillion web pages that provide info on passing a cup test…)

Say you are prescribed Oxycontin, but haven’t been taking the pills.  You’re scheduled for an office visit, have sold your pills, and don’t want to get caught.  You can rent pills to pass a pill count, and if you’re asked to pee in a cup, you can shave one of the pills into the cup, thereby adding the chemicals that will show you are compliant.
Voila!  you’re clean!

Except, if your sample gets sent to a lab for quantitative testing.  It is much harder to fool good lab testing because the testing equipment:

  • uses much lower cutoff levels for drugs, thereby finding more positives than cups do;
  • tests for metabolites – the chemicals created by your body after it processes the drugs: metabolites show you’ve actually taken the drug
  • checks for certain chemical markers that can indicate if the urine is fake or from another person (or, in some cases, another animal)

There’s much more to this; warning, if you start looking around on the web, you’ll find some incredible stories and myths and tales about folks allegedly passing tests; great for entertainment but very easy to become mesmerized for hours.

I recently reviewed data from a very large sample, specifically looking for data about cup results vs lab (quantitative) results.  The analysis was rather disturbing…Cup tests missed:

  • 45% of opiates (cup reported no opiates, lab reported opiates)
  • 44% of benzodiazepines
  • 28% of marijuana

Cup tests also indicate drugs are present when the lab tests show they are not, false positives occurred in:

  • 27% of reported opiates
  • 69% of antidepressants
  • 100% of PCP

What does this mean for you?

Be very careful about basing decisions on cup tests – even if they show there aren’t any anomalies or “unexpected” results.

Jul
10

There’s no such thing as an “Obamacare” health plan

Posted by Joe Paduda on Friday, July 10th, 2015 | Comments

Some blame “Obamacare” for pretty much everything; high insurance costs, increasing deductibles, access issues (real and imagined), narrow networks with fewer physicians, hospital closures, global warming (oh, wait, no such thing).

And worst of all, this is all due to the “Obamacare health plan”.

Which is kinda weird as there’s no such thing.

Outside of Medicaid and Medicare, there is no governmental health plan option available anywhere. None.  Yet I’ve heard from doctors’ office staff (who really should know better), folks in the health care industry, and lots of the “people on the street” who attribute everything bad about health insurance, coverage, cost, bureaucracy to Obamacare.

Facts…

  1. All health plans are offered by commercial insurers and health plans.  Anthem, Blues plans, United Healthcare, Aetna, Humana, you name it – all are independent, private insurers.
  2. These health plans design their own insurance offerings, market them to the public and employers, balancing access and cost, coverage and deductibles, benefits against market demand.  Yes, there are tight definitions about core benefits that must be covered: this is so consumers’ health needs are addressed, not excluded by some fine print buried deep in a Summary Plan Description.
  3. Health plans alone determine what doctors are in-network, deductibles and copays, premiums and physician reimbursement. Not the feds or the Exchanges, but each insurer/health plan.
  4. Health care costs are going up (in some places by a lot, in others not so much) because of factors like:
    1. too much crappy medicine,
    2. a reimbursement system that pays docs too much for doing stuff to patients and not enough for talking with those same patients,
    3. over-utilization of some health care services,
    4. an aging population,
    5. obesity and other lifestyle factors,
    6. outrageous prices for some drugs (driven by for-profit pharma)
    7. a large uninsured population that forces health care providers to charge insured patients more to cover their costs of treating those without coverage (we’re talking about you, Texas, and you, Florida, and Kansas and Mississippi and Alabama and Wisconsin and…)
    8. stupid benefit design that relies way too much on deductibles and nowhere near enough on coinsurance (where members pay a percentage of the cost for each service, thereby exposing them to the real cost of services)
    9. a completely disjointed and dysfunctional health care non-system with prices much higher than any other industrialized country and outcomes mostly worse.

As Donald Rumsfeld said, “you’ve got to go to war with the Army you’ve got.”  Much as I despise Rumsfeld, he was unfairly pilloried for that very perceptive comment.  The reality is simple – “Obamacare” was, and is, an attempt to broaden coverage and allow the private market to figure out how to improve care and reduce costs.

Yes, there are a lot of regulations about how insurers have to do that; given the insurance industry’s financial motivation to avoid insuring sick people and actually pay claims it is no surprise that the regulators are trying to protect consumers from big insurers and their legions of lawyers.

Is this ugly and are there stupid regulations and are costs going up way too much in some areas and is it all way too complex and confusing?

Oh yeah.

What did we expect when reforming an industry that is responsible for one out of every six dollars of our economy? And was failing miserably at delivering good care at a sustainable cost?

Hell, we can’t even prevent trains from crashing, or fund a bill to fix our crumbling infrastructure, or reform our amazingly nutty income tax system, or stop doctors from making millions dispensing drugs to work comp patients.

We are well on the way to fixing one of the biggest problems in our country, And we’re “disappointed” in health care reform?

Really?

What does this mean for you?

It is, indeed, a clustermess.  

Some people will get hurt.  Some companies will fail,  Some will get fabulously rich.  Some will go to jail.  But in the end, more will have insurance, insurers will compete on a relatively level playing field, and incentives will be more aligned with what we consumers want – better health at low cost.

Jul
8

The real problem with California’s IMR process

Posted by Joe Paduda on Wednesday, July 8th, 2015 | Comments

There’s 10 docs in LA who account for 1 of every 8 IMR requests in California’s work comp system.

That’s about 3 for every working day for each physician.  That’s a shipload of IMR respects.

According to research just released by CWCI, 88.5% of their requests to overturn a UR decision are rejected.

One wonders if they find something new to appeal each and every time, for surely they must know that if drug A has been rejected 10 times out of 10 – or 20 out of 20, or, well, you get my drift – it probably makes no sense to ask for it again.

Unless, you’re just trying to flood the IMR system, choke it with requests so it can’t function, and pick out one or two screw-ups to hold up as evidence that the entire system is broken.  Conveniently ignoring that the flood of unnecessary requests may have played a big role in screwing up that system.

Then you complain that decisions are delayed and late and not fulfilled, conveniently ignoring that most of those delays are due to a failure on your part to send in the right documents.

But let’s set aside these disagreements and focus on what’s really happening here.

We all know that many treatments hurt patients; unneeded surgery, too many MRIs, the wrong drugs or overuse of opioids do much harm.  That’s been so well documented you don’t need me to provide citations.

Yet a handful of docs persist in demanding they be allowed to do this to their patients – to overprescribe opioids, to over-radiate, to cut and sew.

Drugs account for almost half of all IMR requests – the vast majority of the denied drug requests are for opioids, a drug class long known to be dangerous, subject to abuse, and rarely appropriate except for short term treatment of trauma or post-surgical pain.

Let’s have a conversation about the human cost of this unnecessary and dangerous treatment. We’ve heard a lot about the harm caused by payers and processes that fail patients – some of it has been accurate and some wildly distorted (the denial of spinal fusion, for one)

What does this mean for you?

For those who tout themselves as claimant advocates, are you ready to talk about over-treatment and the damage it causes and what you will do to protect your clients?

If not, why not?

Jul
7

Is work comp still in investors’ sights?

Posted by Joe Paduda on Tuesday, July 7th, 2015 | Comments

After dozens of acquisitions, mergers, and buyouts over the last four years, there have been relatively few transactions of late.

This isn’t due to lack of interest on the part of investors, anything but.

No, private equity companies and big companies alike are still on the lookout for potential deals, scouting for assets that

  • are under-resourced,
  • have promising technology or business models or exemplary management,
  • can drive more revenue to specialty firms and/or suppliers, and/or
  • dominate increasingly narrow niches.

No, it isn’t lack of interest, but a combination of factors that have led to the seeming-slowdown in activity. Here are a few that come to mind…

  • fewer assets (companies) to buy.  With all the deals done over the last few years, there just aren’t as many companies in the space.
  • the assets that are left are bigger.  Private equity firms typically focus on specific segments – with one of the criteria being size.  As the supplier industry has consolidated, there are far fewer midsize companies around for the PE firms that specialize in that niche to pursue.
  • prices are really high.  A few years ago, a multiple of 7 times EBITDA (sometimes equated with cash flow) was considered good.  Now, that’s laughable. Two closely related issues here; 1) sellers focus on deals with really high multiples (10x for Genex, a case management company!!), know their baby is much more beautiful, and want more; and 2) PE firms – the smart ones – don’t want to overpay.
  • the more potential buyers understand work comp, the more they “get” the underlying growth issues.  The total work comp market is likely shrinking. Frequency continues its long-term structural decline.  The employment market is changing, and that change will accelerate over the next decade.  Unless an asset has a proven management team, is winning market share and growing organically (by selling more business, not acquiring other businesses) and has the “sustainable competitive advantage” the structural headwinds are tough to overcome.

That said, there are a couple niches that look promising.  

Work comp pharmacy is one; margins remain steady; the PBM industry has really upped its clinical and operational game; there’s still considerable growth opportunity within existing customers; and many PBMs have very solid management teams.

Small  companies that focus on a narrow niche are enjoying a lot of success, taking advantage of the failure by some of the now-huge service vendors to deliver even basic customer service.  MegaCorp’s strategy, dictated by its owners’ theoretical ideas about how combining this service with that vendor and this other distribution channel will allow them to get all of the ancillary business from every payer means it isn’t paying much attention (often, almost NO attention) to basic customer service.

With priority now given to growth and debt service and cost cutting, MegaCorp is ignoring such niceties as billing correctly, returning phone calls, providing updates on services, reporting outcomes, and integrating their various disparate operations, services, distribution channels and other acquisitions.

The result is the promise of an integrated service provider continues to be two years away, as it has been for the last decade.  Into the service gap have stepped entrepreneurs, many refugees from acquired companies, who get it.  They built their predecessor companies on service, high-touch, dedication to their clients and a deep understanding of what works and why and how.

They are building the next batch of companies that, even now, are attracting the interest of investors.

Expect there to be continued activity at the highest end of the market, and watch for investments by savvy firms helping fund these small companies as they look to grow their businesses. 

 

Jul
2

Thursday catch-up

Posted by Joe Paduda on Thursday, July 2nd, 2015 | Comments

Hope you, your family and friends have a terrific Fourth of July; we will be celebrating at home in upstate New York and watching the American women take on Japan in the World Cup Final.

The brief update on what’s happened this week and last.

The economy

A sizable increase in employment in June – 223,000 new jobs were added.  About 1.2 million jobs have been created so far this year. (edit – quoted May’s figure in an earlier version; apologies for my confusion)

The unemployment rate dropped to 5.3% from May’s 5.5%, but the labor force participation rate also decreased, driven by lower participation among teens and younger men.

This morning’s employment report shows an economy that is adding jobs in construction, retail and business services.

While wages were essentially flat in June, over the last twelve months employers have been (slightly) increasing wages in an effort to land and keep good workers – work comp folks can expect more premium dollars, and likely more injuries as newly-employed workers tend to get hurt more often experienced employees.

Overall, the report is good news; more workers making more money means they spend more – a virtuous cycle.  BUT there are some economic headwinds. The strong US dollar is hurting exports which isn’t good for manufacturing.

The ACE – Chubb deal

Looks like “Hank Junior” is following in Hank Sr.’s footsteps; with the acquisition of perhaps the most respected brand in the P&C business, ACE becomes one of the largest insurers in the industry with a diverse portfolio of insurance lines, complementary distribution, and very strong management and culture in Chubb.

Notably, the new company will take the Chubb name.

There’s a LOT of press out there on this deal, most authored by folks with a lot more insight than I have.  My take is this is a smart deal for ACE; IF they don’t screw up Chubb and thereby damage a highly-regarded brand.  Evan Greenberg et al are too smart to do that; they didn’t pay a 30% premium for Chubb without clearly understanding why the company is worth it.

Healthcare reform

Lots of information out there re who’s newly insured, what they are paying, and related matters.

There are more uninsured men than women, and they have more problems accessing and paying for care.

There’s been a lot of talk about premium increases for next year – and that’s caused a lot of confusion. The latest data suggests that people with the most common plan – the lowest cost silver – won’t see those big price jumps. KFF reports a survey of the benchmark plans in 11 cities indicates an average premium increase of 4.4%.

The range is wide, from a 16.2% jump in Portland OR to a 10.1% decrease in neighboring Seattle (go figure).

BUT – there have been some big jumps in some markets, and pricing is all over the place.  Some plans have filed for increases north of 20%. Expect the marketplace to reward those plans that have held the line – and expect those plans to have narrow networks and hefty financial penalties for out of network care…

The reason there’s been so much talk about big price jumps is healthplans planning on raising premiums more than 10% have to report that to regulators early on; that generates a lot of buzz. Obviously, that buzz doesn’t take into consideration the plans that are NOT planning on big price jumps.

Much more on this in future posts.

There are a couple of really interesting work comp research reports that came out this week; I’ll be reading them on the plane back from Seattle today and report back to you, dear reader, next week.

Enjoy the weekend, and cheer for our women on Sunday!

Jul
1

Why is Genex buying more case management?

Posted by Joe Paduda on Wednesday, July 1st, 2015 | Comments

Yesterday Genex announced it acquired yet another case management firm; Integrated Care Management of Alpharetta GA and their 150 employees broaden Genex’ CM coverage in about 20 states.

This comes on the heels of the MHayes purchase. According to sources familiar with the deal, the Maryland-based firm reportedly commanded a pretty high multiple; congratulations to Melinda Hayes on that news.

While there were no details on price or cash/stock mix for the ICM transaction, the timing likely had everything to do with last week’s announcement that Genex increased their borrowing capability by almost $80 million.

The announcement, dated June 22, noted “Net proceeds from the offering will be used to fund acquisitions.”

ICM’s revenues will push Genex’ top line well above $400 million, and further consolidate its position as the dominant case management firm in work comp (with footholds in other insurance niches).

That said, the debt to earnings ratio will now exceed 7.5x, a level Moody’s considers “aggressive for the firm’s rating category…” The rating agency doesn’t seem too worried, as they expect the ratio to improve due to organic growth and higher EBITDA (earnings before interest, taxes, depreciation and amortization).

I’m puzzled by the “organic growth” expectation.  Case management, especially field case management, is declining for two reasons; work comp claim frequency continues to drop 2 – 4% a year, a decline that is structural, long-term, and seemingly-inevitable. And payers’ use of field case management continues to decline, with most preferring telephonic and using field only for a relatively-narrowly-defined group of claims. While Genex does a LOT of telephonic CM, TCM is fairly easy to internalize (altho some states regulatory requirements make it feasible only for payers with significant volume).

Moreover, payers continue to seek ways to capture more and more services internally; they don’t like to vend claims services they can do themselves, thereby adding revenue, increasing efficiency, and better integrating process. Think York’s acquisition of Wellcomp, Sedgwick’s ongoing efforts to acquire a wide variety of claim service vendors, GB and MedInsight, the Hartford handling MSAs with internal staff.

Methinks there is one primary reason for the growth-by-acquisition strategy – case managers may well be expected to drive business to One Call Care Management.

And one secondary – organic growth (despite Moody’s optimism) just isn’t happening.

Genex is owned by Apax, the private equity firm that also owns One Call Care Management.  One Call provides imaging, physical therapy, DME/home health, transportation/translation, dental and other services to the work comp industry, a portfolio of services that accounts for about a quarter of total workers comp medical spend.  Genex’ 1800 +/- case managers would be a great mechanism to recommend/refer/direct business to OCCM whenever and wherever possible.

From an ownership perspective, this makes perfect sense.  At some point Apax will sell these assets, and combining them – the service provider and the referral driver – into one entity makes the whole greater than the sum of the parts.

Of course, this assumes Genex et al provide exemplary customer service, meet the needs of current customers, resolve any issues quickly and to the satisfaction of clients…

A cautionary note for ICM employees; study any new paperwork very carefully, and look closely at any non-compete agreements.  You want to be sure you know what you are signing. 

What does this mean for you?

Who controls your referrals?

Jun
29

Work comp drug trends; Coventry’s report

Posted by Joe Paduda on Monday, June 29th, 2015 | Comments

Coventry’s work comp PBM – First Script – released their drug trend review last week; they’ve taken a bit of a different tack than other PBMs, choosing to report broadly across all scripts while differentiating between “managed” (in-network retail/mail and contracted physician and clinic dispensed) and unmanaged scripts.  Note that Coventry reports on compounds separately.

The report is replete with infographics used to highlight cost trends, workflows and decision processes, charts and graphs which make it quite readable; specific data points and issues are easily located and understood.  Overall, the report is well laid-out and professionally done; as with other recent efforts (including CompPharma’s most recent PBM in WC Survey) drug trend reports have benefited greatly from the expertise of graphic designers.

Physician- and clinic-dispensed medications accounted for 5.1% of spend; retail/mail for about 69% of spend. Opioid dollars totaled about a third of total managed drug dollars.

Key cost drivers include an AWP increase of almost 10% across all drugs. That price increase was somewhat offset by a 5 percent decrease in utilization (7.4% for narcotics) which resulted in an overall cost-per-claim increase of 7.3%.

A key finding is a major increase in generic utilization and spending (mirrored by CompPharma’s soon-to-be-released 2015 report).  Generic spend was up a whopping 19.3% while single source brand spend dropped by 9%; generic forms of Cymbalta and Lidoderm helped drive generic utilization up over 5 percent.

Coventry reported a 4.1% decrease in short-acting (SA) narcotic script volume; long-acting dropped by 3.2%. Vicodin, the #1 prescribed drug, saw utilization drop almost 8%. Unfortunately higher AWP pricing for several common SA narcotics more than offset that decrease in units, driving overall SA narcotic spend up 8 points.

There are helpful statistics on utilization by drug class by age of claim; changes in specific drug spend and utilization year over year, details on what drugs saw the biggest changes in volume and price, charts illustrating various correlations between claim age and pharmacy, and details on compound utilization.

Notably, Terocin(c), a compound, accounts for more unmanaged spend than any other drug; the growth in all topical medications is quite remarkable. In total, compounds accounted for 7.7% of managed spend and 28.1% of unmanaged spend.

Coventry’s report is data-rich, and this is particularly illuminating in their in-depth analysis of compounds.  Trends in utilization and spend by state, claimant usage, and in-network v out-of-network are analyzed in depth.

What does this mean for you?

Compounds are growing rapidly, efforts to control narcotic utilization are bearing fruit, and generic price inflation remains problematic.