Author: Joe Paduda

Feb
24

Fraud, huge profits, and long jail terms

Posted by Joe Paduda on Monday, February 24th, 2014 | Comments

Are all described in detail in Greg Jones’ terrific piece in this am’s WorkCompCentral.  The 1,000 + word piece lays out the fraud perpetrated on California’s employers by the owner of Pacific Hospital, the complicity of two California legislators, and the cost – a whopping $500 million.

Michael Drobot has pled guilty, and is looking at up to 10 years in prison for allegedly paying kickbacks to get docs to use his hospital for spinal fusions, while also allegedly bribing a state Senator, Ron Calderon.

Calderon is also facing charges; a 24-count indictment was filed last week charging bribery, money laundering, and conspiracy.  He and his brother are each looking at possible sentences of over 100 years.

Drobot paid “a kickback of $15,000 for each lumbar fusion procedure that was referred to his hospital and $10,000 for each cervical fusion procedure.”

Folks who have followed California work comp long puzzled over why the state allowed providers to double bill for the cost of implants (see research report dated 6/6/12); this was finally addressed a couple years back, but only after Drobot and his cronies sucked $500 million out of employers’ and taxpayers’ pockets.

There are two things to take away from Jones’ piece –

  • Investigative journalism lives on – although only at niche pubs, the very largest mass media outlets (NPR, Rolling Stone, NYTimes), and independents (ProPublica).

  • Employers and taxpayers are losing hundreds of millions of dollars to sleazeballs who’ve figured out work comp is a very soft target. And this continues with physician dispensing…
Feb
21

Friday catch-up

Posted by Joe Paduda on Friday, February 21st, 2014 | Comments

It’s been a very busy week.

Today Mitchell announced they’re going to buy specialty bill review firm FairPay Solutions.  Makes sense for Mitchell, as FPS’ technology and expertise is unmatched in the business, and will add a lot of value to Mitchell’s WC and auto BR solutions. Looks like current FPS CEO Chad Birckelbaw is only sticking around for a few months.  That’s a BIG loss for Mitchell; Chad is not only one of the best people in the work comp services business, he’s also the guy who automated what had been a mostly-manual process and kept FPS moving forward in what has become a very competitive business.

Notably, Mitchell’s announcement said FPS will continue to support other bill review entities.  That’s not going to last.  I very much doubt the other BR companies are going to keep working with FPS; there’s just too much inherent conflict and the other firms are likely very concerned about KKR’s future plans for Mitchell.

There are a couple other transactions in process now which should close shortly.  Looks like the trend is positive for strategic buyers – other companies with related businesses as they are winning most of these bidding wars.

WCRI has just released their annual CompScope Medical Benchmarks reports; the latest info on what’s happening in 14 states; haven’t had time to dig into them but hey, that’s what weekends are for!

The Benchmarks will be discussed at length at WCRI’s annual meeting – if you haven’t signed up yet, best get on it as they do max out.  March 12-13 in Boston…details are here.

On the I-Can’t-Wait-Till-We-Drive-A-Stake-In-Their-Black-Hearts front, Pennsylvania, Arizona, Hawai’i and Maryland are doing their best to control physician dispensing in work comp.   Alas, bought-and-paid-for legislators are much more interested in taking cash from dispensers than saving taxpayer dollars and employer jobs; in a hearing in the PA legislature, Representative Donna Oberlander asked Labor and Industry Secretary Julia Hearthway how much money the Workers Compensation Program would save if the General Assembly ended physician dispensing.   

The response – $18-$26 million.  

 

 

Feb
21

The price of the pill is so last century

Posted by Joe Paduda on Friday, February 21st, 2014 | Comments

For every complex problem there is an answer that is clear, simple, and wrong.

Thank you, HL Mencken, for describing the problem inherent in picking a workers’ comp PBM based on how much they charge for drugs.  

It is really easy to compare bids from PBMs based solely on how much they’ll charge for brands and generics.

It is also wrong.

While workers comp insurers have (mostly) figured out that the price of the pill is a lousy way to decide on a PBM, every now and then I get a call from a payer who’s just been offered a GREAT price from a PBM, and is either a) gleeful that they have been so smart and such a cunning negotiator; or b) panicked because their boss wants to change PBMs and the vendor manager knows it’s going to blow up.

Okay, let’s walk thru this.

The price of the pill is important, but it is only ONE part of the equation. Which is as follows:

Price per pill x number of pills per script x percentage of scripts processed in the PBM’s network.

Price per pill is determined by the discount below AWP, brand:generic mix, and, most importantly, by the type of pills dispensed.  If a PBM does a crappy job managing the clinical aspects of the pharmacy program, you’re going to pay for far too many pills, and for the wrong kind of pills. It’s safe to say you’ll be paying for lots of opioids, Soma, and other highly-questionable-if-not-downright-harmful-drugs.

But hey, at least you’re getting them for cheap!

Lets say you don’t care about the kind and volume of pills, you just want the deep discount.  Even then, you will likely find the cheap PBM delivers crappy results.  Here’s why.

PBMs that pitch really low per-pill pricing are likely using a group health-contracted pharmacy network, which leads to problems with paper bills and administrative hassles for adjusters.  Regardless, the network penetration for the cheapo PBMs tends to be pretty low compared to the WC PBMs.  There’s a bunch of reasons for that which I won’t get in to here.

Suffice it to say that while you may get a great price on 40% of your scripts, you’ll be paying flat-out retail on the other 60%.

In contrast, WC PBMs typically deliver penetration in the 80+% range.

So, even if their discount isn’t nearly as low as the cheapo ones, the effective price will likely be lower – because you get that discount on twice as many scripts.  

What does this mean for you?

Look at the price, sure, but look at penetration.  And, of course, clinical programs.

Because the greatest penetration in the world is a big problem if its all opioids and Soma.

Feb
20

Whither Work Comp?

Posted by Joe Paduda on Thursday, February 20th, 2014 | Comments

Hopefully it isn’t “wither”…

There’s been a good deal of reporting on trends in work comp premiums and coverage of late, with a good piece in WorkCompWire on Marsh’s market survey describing a softening market for many employers.  The WCW article comes on the heels of one in Insurance Journal announcing the “good news” that the P&C industry returned an underwriting profit for the first time in four years.

It’s a bit disturbing that the industry had to rely on investment income to make a profit for three of the last four years, nonetheless the news from AM Best that net income increased 60 percent to $63 billion in 2013 is encouraging news indeed.

WC is a relatively small part of the P&C industry, typically about 11 percent of total premium.  Here are a few quick takeaways.

So, what does this mean?

When profits climb, the market typically starts to soften as capital comes in to work comp, seeking to take advantage of the financial returns. Carriers get more competitive, seeking to add share, and there are more carriers bidding on employer business.

I’d expect this will happen this time, and we’ll see prices level out this year in most states.  This may not be readily apparent as the rates insurance companies file with regulators may not change much, but discount arrangements may well increase.

 

 

Feb
19

Why are drug dispensing firms supporting fee schedules for doc dispensed drugs?

Posted by Joe Paduda on Wednesday, February 19th, 2014 | Comments

Doc-dispensing firms have their minions out and about in multiple state capitols, using their dollars to buy lobbying prowess and support pliable politicians (talking about you, Clayton Hee in Hawai’i).

What’s different these days is they are supporting fee schedules in many jurisdictions – Hawai’i and Maryland being two.

Why?  Well, you could ask drug dispensing “technology” firm AHCS’ Board Member Hilary Grove. She’s with ABRY, the private equity firm that owns AHCS; shoot her an email at hgrove@abry.com.  Please.

Or you could track their recent activities.  Such as:

  • they’re getting in to the drug compounding business – actually they’ve been doing that for a while. There are at least two compounding pharmacies affiliated with AHCS or AHCS personnel – Compound Care Pharmacy Rx (which appears to be owned by AHCS) and ezCompound Rx, which has the same attorney as AHCS listed as their “correspondent”.

    No surprise there, as compounded drugs are becoming much more common in work comp, despite no credible research suggesting it is appropriate for the vast majority of patients. Compounds are very, very, profitable… 

  • they’re working with very small drug “manufacturers” who can “manufacture” drugs, file their own drug code (NDC) and price (AWP). Remember, in many states, WC fee schedules for repackaged drugs are based on the original manufacturer’s AWP – which is nothing more than whatever number the “manufacturer” wants to use, and bears NO relation to the ACTUAL price dispensing docs pay for the drugs.This is pretty clever as it essentially eliminates the price controls put in place by many states and allows dispensers and their enablers to continue making huge profits for their owners.

Alas, many payers are still focused on controlling the price of the pill or compound, a strategy that is obviously fundamentally flawed as it’s really easy to circumvent.  And ignores the research that demonstrates dispensing actually increases indemnity expense, keeps patients out of work longer, and increases other medical costs, thereby increasing employers’ and taxpayers’ costs.

Doc dispensing is a billion-dollar business.  It is maturing, getting smarter, and figuring out ways to sustain and grow its revenue. And work comp payers are not even close to keeping up.

What does this mean for you?

Doc dispensing increases loss costs about 3 percent.

How much premium do you have to sell to earn profits equal to 3 percent of loss costs?

That’s what this is costing you.

 

Feb
14

I Heart Workers’ Comp

Posted by Joe Paduda on Friday, February 14th, 2014 | Comments

Time to take off the CrankyPants and list all the reasons I really love workers’ comp – and yes, there are more than three!

healthy-heart

  • Work Comp is great because it has a REAL outcome – care is judged based on getting the patient back to functionality.  And that’s how ALL medical care should be measured!
  • Work Comp is great because it works pretty well, most of the time.  Not the highest standard, but given all the efforts by all the bad actors to screw things up, it’s a minor miracle it hasn’t come to a grinding halt everywhere.
  • Work comp is great because most docs, PTs, pharmacists, and rehab professionals, and yes even attorneys are diligent, responsible, committed, and concerned.
  • Work comp is great because the vast majority of claimants really truly want to get better fast and get back to work.
  • Work comp is great because it is a pretty small world, reputations spread quickly, and the community supports those who do good work.
  • Work comp is great because it is a LOT better than the alternative…
  • Work comp is great because almost all of the regulators I know really want to make the system work better/faster/cheaper/more responsibly.
  • Work comp is great because there are many smart, loud, and committed folks talking and writing about what needs to happen and why.  Sure they/we get frustrated a lot, but they keep it up.  I’m talking about you, WorkersCompInsider; Roberto Ceniceros, Rebecca Shafer, David DePaolo, Denise Algire, Bob Wilson, Peter Rousmaniere, Richard Krasner, Mark Walls, Jen Jordan.
  • Work comp is great because CWCI president Alex Swedlow really knows his stuff, calls it like he sees it, and can make even the most arcane, technical, dry stuff interesting and important.
  • Work comp is great because WCRI has upped its game considerably.  Research now uses much more current data and their work in social media is getting stronger by the day.
  • Finally, work comp is great because we hold each other accountable.

 

Feb
13

Sharing the love for health wonkery!

Posted by Joe Paduda on Thursday, February 13th, 2014 | Comments

The good folk at health insurance.org are hosting this biweek’s edition of Health Wonk Review.

There’s so much going on these days in wonk-ville that it is tough to keep up; thank goodness HWR does it for you!

Now you have more time to shop for your sweetie.

We know!  What would you do without us!

Feb
13

WCRI’s annual confab – a month away

Posted by Joe Paduda on Thursday, February 13th, 2014 | Comments

Held again in Boston, WCRI’s annual meeting is one of the better research-focused events on the annual calendar.

It always includes a timely topic as well as a deep dive into key issues explored by the geniuses at WCRI; we can also expect insights into the impact of the economy on comp, updates on WCRI’s Benchmarks analyses, and the always-terrific Alex Swedlow will educate on medical dispute resolution.

This year the focus is on the impact of Affordable Care on work comp, a subject near and dear.  I’m a bit surprised about the timing as PPACA has been the law of the land since 2010; payers who haven’t done their homework and prepared for tighter access, potentially more cost-shifting, revised hospital coding, and strengthened subro efforts by group payers are going to be far behind.

There was much that work comp payers could – and should – have been doing to prepare for PPACA over the last four years; those who have not are way behind. Fortunately, they can gain some insights from the several presentations on the subject at WCRI.

(Here’s a link to a nine-part series on Obamacare and WC; dozens of other posts are here.)

As always, I’ll be reporting from Boston, but won’t be nearly as prolific this time around…if you want to hear the good stuff, see you there.

Feb
12

How much do docs pay for repackaged drugs?

Posted by Joe Paduda on Wednesday, February 12th, 2014 | Comments

In Maryland and Hawai’i, docs are claiming that they pay much more for drugs than retail pharmacies, therefore they are justified in getting paid a lot more than retail pharmacies.

Bullshit.

Now that I’ve got your attention, here’s the truth.

This is just one page from a document was included in All State v Prescription Partners, a lawsuit filed by the big insurer in Federal court last summer.  It is described as “the drug list included in the “sales pitch” of AHCS…”

It is pretty much self-explanatory. 
 All State v. Prescription Partners_34

 What does this mean for you?

Two things.

1.  Legislators should demand proof from dispensing advocates that their costs are higher and justify their outrageous prices.

Clearly they are not, and dispensing advocates testifying that their costs justify their prices are misleading/uninformed/duplicitous.

2.  More evidence of the ongoing effort by profiteers looking to suck money out of employers and taxpayers.  

Feb
11

UR in California’s a BIG problem…or not

Posted by Joe Paduda on Tuesday, February 11th, 2014 | Comments

The California Applicant Attorney’s Association says there’s a BIG problem with UR in California, and a recent analysis by CWCI is flawed and inaccurate.

I don’t see it.

Greg Jones’ piece in yesterday’s edition of WorkCompCentral digs deep into the issue; here’s the brevitzed version of the disagreement.

CWCI analysis indicates about 75% of ALL treatment requests are approved by the adjuster or surrogate referring 25% on to an elevated physician-based UR process.

Elevated UR denies or modifies 23% of the treatment requests for an overall denial/modification rate of about 6% (.25 x .23 = 6%). The denial rate falls even further to less than 5% for claims that go through the state’s new medical dispute resolution process, independent medical review (IMR).    CAAA’s consultant argues that the denial rate is higher, by:

  • citing different studies from different years with different samples, thereby comparing apples to oranges;
  • asserting that there’s a lot of variation in denial rates among payers, as if this was a bad thing or even meaningful (different employer types, different locations, different medical management strategies);
  • claiming that CWCI’s analysis was in error because their study included medical-only and not just indemnity claims, as if a standard of care or UR should or could somehow be different for claims with lost time. Guidelines are guidelines; they apply to all injured workers and don’t vary by type of claim.

Moreover, the premise of CAAA’s argument – to the extent there is one – is fatally flawed.  

A denial rate of 5% is hardly a catastrophe – especially when one considers where California was before the 2004 reforms – known as the physician’s presumption of correctness. Treating docs decided what treatment was appropriate, based almost exclusively on their personal opinion, or for a relative few, how they could generate the most revenue.  Payers had few opportunities to challenge a treatment plan. Treatment costs exploded to over $12 billion a year.

Would anyone allow a vendor to completely determine what services they were going to provide at what cost to whom? 

Of course not. This is completely at odds with every other payer system’s medical management methodology/process, because it is wildly illogical.   Yet that appears to be the motivation behind CAAA’s “analysis”.

Today, about 5% of treatment requests are denied or modified, medical costs are half what they were and employer premiums are way down as well.

Let’s look a little deeper at the results.

CWCI found that 43% of elevated UR and a third of the IMR reviews were for drugs. About half of those RX reviews are for opioids and compound drugs. Most likely a relatively few docs have a disproportionate percentage of challenged treatments.

The key is what are they doing and why – if they are prescribing Oxys to patients not supported by medical evidence, that’s wrong.  And, the current IMR process has begun to fix that problem.

Yes there are workflow problems, problems that will be resolved. Yes the process needs to get a LOT more efficient and less expensive. Yes guidelines need to be constantly updated.

And No, we don’t need to go back to the days of never ending treatment at the whim of the treating doc and bankrupt insurers.