Why health care costs too much

If you go into the hospital for surgery, there’s about a ten percent chance you’ll be back – victim of a surgical infection, gastrointestinal problem, or other complication.

Of course, this being healthcare, (in general) the facility isn’t financially penalized for the problem.  In fact, they’ll increase their revenue – up to $58,000. So, the more re-admissions, the more revenue for the hospital (on average, they get about $1.2 million a year more due to re-admissions).

Fortunately, CMS and a few other payers are taking steps to help hospitals reduce re-admission, with the most important step being a refusal to pay for some re-admissions.  That’s helping to concentrate the efforts of many providers, who are working hard to figure out what causes re-admissions and what to do to forestall them.

That’s not to say that ALL re-admissions are due to hospital error, infection, or other issue – some patients just have problems.

But – and it’s a big BUT – many re-admissions CAN be prevented – BUT absent a financial motivation, there’s just no reason for the hospital and providers to do much to prevent them.  In fact, there’s 58,000 reasons to not try.

Today, our reimbursement “system” rewards excess treatment, expensive technology, over-utilization.  If we are to gain control over our costs and improve our (very mediocre) outcomes, we have to reward good performance and penalize bad – while working with the poor performers to help them improve.

CMS is leading the effort, starting with its decision to not pay for “never-ever” events, continuing with reductions in reimbursement for selected diagnoses, and then expanding to cover more in 2015.  And where CMS leads, other payers will benefit – as hospitals ratchet up their performance, re-admissions for all payers will decline, lowering costs while improving outcomes.

What does this mean for you?

Why are you paying for poor performance by healthcare providers, when you wouldn’t get paid to fix your own work if it was less-than-acceptable?

Time to rethink your provider contracts…



Killing compounds and workers comp – UPDATE

Update – this morning we find out that only two states – MO and TX – test compounded drugs, and their findings are alarming indeed.  The strength of the potions concocted by compounders can vary greatly, with Texas determining a quarter of the compounds they tested were “too weak or too strong” and MO finding the potency is as much as three times higher than the compound was supposed to be.

Although the FDA’s ability to regulate compounders is very limited, the agency studied compounds produced by12 different pharmacies a decade ago; a third of the products failed one or more standard quality tests.  Another test in 2006 found the same results.

According to the NYTimes, the “International Academy of Compounding Pharmacists suggested that [compounding pharmacists] respond to any request for samples by saying, “We do not compound or distribute ‘samples’ of any of our prescription medications to anyone.” And if a compounded drug was on the premises, the trade group added, a pharmacist should say it was awaiting pickup by a patient…the memo is emblematic of the industry’s frequent and often successful attempts to fend off regulators at a time when concerns are growing about the quality of compounded drugs and the uncertain provenance of their ingredients, some of which originate in China [emphasis added] and flow through various repackagers and middlemen with little scrutiny, according to interviews with health experts and government records.”

Original post – When will we hear of the first workers comp claimant to die from a faulty compounded drug?  Has it happened already?

This isn’t hyperbole – compounded drugs have blinded victims and killed before – a  young woman using a topical anesthetic, a patient treated for pain, nine deaths from defective solutions produced by an Alabama compounder, and the most recent  – and worst – outbreak of meningitis.

In all, there have been at least 200 “adverse events” involving 71 compounded products over the last twenty years. Yet lax – or non-existent – regulation continues to this day.  Compounding pharmacies are regulated (for the most part) by the states.  The reality is many states are poorly equipped to deal with the issue, and many states really don’t do much to regulate/monitor/enforce regulations related to compounding pharmacies.

This from Michael Cohen, an expert on the issue:

Compounding pharmacies should be testing and monitoring the environment in which products are compounded, training and closely supervising staff, adhering to the recognized standards for compounding safety that were formulated by the United States Pharmacopeia (in Chapter <797> of the USP) and detecting process deviations before they cause harm. Yet, an analysis of recent cases of contamination of products from compounding pharmacies that have led to adverse health outcomes revealed that breaches of standards, unsafe staff behaviors, untrained and unskilled personnel, improper use of equipment, extended beyond use dating outside of manufacturer labeling without sufficient testing, and/or a general lack of good compounding skills had been involved in almost all cases.Without federal oversight and/or greatly improved state oversight of compounding pharmacies, patients will continue to be harmed.

So…why aren’t the Feds more involved?

Glad you asked.  Turns out there have been repeated efforts to increase oversight of compounding pharmacies, however they have been stymied by effective lobbying from, among other groups, the International Academy of Compounding Pharmacists.

The IACP claims “compounded medicines are a critical part of modern, individualized health care and provides them the necessary tools to ensure that access to personalized medication solutions remains possible.”, yet they’ve been instrumental in successfully blocking federal regulation of “mass-compounding” thru an effective lobbying campaign involving Congress.

While compounding advocates talk about the need for individual, customized medicine, they lobby to prevent oversight of what are really drug manufacturers masquerading as compounders.

The result is now evident – 23 dead patients, and more may be coming.

For workers comp, the implications are clear. The drug produced by NECC is used in treating back pain via epidural steroid injection, an all-too-common procedure in comp.  As of now, there are 281 infected patients, and with an incubation period of up to six months, many thousands of patients agonizing over their potential fate.

What does this mean for you?

If you are a workers comp payer,

  1. Figure out if any of your claimants may be at risk.  The list of affected facilities is here.
  2. Search for the facility name in your medical bill data, along with the CPT codes associated with ESI.
  3. Identify any claimants that may have been affected, and get your medical director and nurse case managers involved.
  4. Get your subro folks involved.
  5. Oh, and tell your Governmental Affairs people to ask Congress to fix the oversight problem.  Unless you want to repeat this process again.


Workers’ comp – an easy target for rogues, scoundrels, and cheats

This morning David DePaolo’s post describes the evolution of theft in California’s workers comp system, walking readers from physician dispensing of repackaged drugs to compounds (next up – blatant overuse of drug testing!).

David notes:

“The complaint…says Cyrus Sorat, owner of Health Care Pharmacy and Deutsche Medical Services in Tustin, Calif., paid 208 doctors to prescribe compound drugs to injured workers needing topical analgesics. Sorat promised to pay the doctors an unreported fee for each prescription they wrote, and also agreed to handle billing and recover receivables on behalf of the physicians, according to the complaint.

Seven of the doctors named are in Florida, Arizona, South Carolina and Puerto Rico, with the rest in California…

The complaint describes a complex scheme [wherein] the doctors named were allegedly paid kickbacks to prescribe the drugs, and the receivables for those prescriptions were then “handled” by the mastermind through several collection/management agencies and bill review companies that were created in a sophisticated scheme of fraud.”

Coincidentally, there’s also news [sub req] out that California regulators are – at long last – trying to close the loophole in the law that allows providers to get paid twice for the same medical device, a practice that, while technically legal, is most certainly not ethical or reasonable – it costs employers and taxpayers over a hundred million dollars a year…

That good news is somewhat overshadowed by a report from Michigan that an effort to restrict reimbursement of repackaged drugs to the cost of the underlying, non-repackaged drug may well be futile.  The language under consideration does NOT reflect that requirement, and repeated efforts to get the regulators and legislators involved to correct the oversight have met with no success.  If the regulation is approved, there is some faint hope that a court case may lead to an interpretation favorable to linking reimbursement to the underlying original manufacturer’s price.

Ideally, regulators will correct the oversight by inserting the word “original” into  R 418.101003a(1)c…just after “Online” and before “manufacturer’s”…

If not, Michigan’s taxpayers and employers will continue subsidizing the lifestyles of the rich  and famous.

I’m sure they’ll be okay with that…


What parts of Obamacare do you want to keep? eliminate?

The ban on medical underwriting and exclusion of pre-existing conditions?

The elimination of lifetime maximums?

The penalty for those who choose not to sign up for insurance?

The expansion of Medicaid to cover those with incomes up to 133% of the federal poverty level?

Requirement that Medicare control its costs or be subjected to stricter controls on useless or dangerous procedures and treatments?

The tax credit for small employers obtaining health insurance?

The requirement that preventive care is covered – at no cost to subscribers?

Tight restrictions on insurers seeking to cancel coverage when subscribers get sick?

It wouldn’t be good policy to eliminate many of these provisions, and, more to the point, it isn’t possible.

First, the policy problem facing Mr Romney.  Let’s take just one example; he’s said he

a) is going to repeal Obamacare on his first day in office, (let’s leave aside that he doesn’t have the ability to do that) while

b) ensuring anyone with pre-existing conditions can get coverage

I don’t see how that works.  In fact, Romney’s “assurances” about coverage for pre-ex are no more than what exists today; as long as you move directly from one insurance plan to another your pre-ex conditions are covered.  For those Americans who haven’t had coverage for a few months, you’re out of luck – insurers won’t have to offer coverage.

Oh, and there are no price limits on what insurers can charge you, so even though Romney says your pre-ex conditions will be covered, it may cost you two, three, even five times more than the list price for that policy.  Which means – really – Romney doesn’t guarantee pre-ex will be covered.

That’s just one provision that’s problematic for Mr Romney.  The reality is there’s a lot to like about Obamacare, as Romney has found – otherwise he wouldn’t be backpedaling on his earlier promise to kill the whole thing. Sure, most folks are only really interested in the one or two provisions that directly affect them – perhaps coverage of kids till they’re 26, or expanded coverage of Medicare drugs.  But he can’t – the practical reality is that unless he gets 60 senators to agree with him, he can’t overturn PPACA or significantly change any of its provisions.

So, the lack of any substantive discussion of health reform in the last debate was appropriate; it’s the law of the land and won’t/can’t be changed despite Romney’s occasional statements to the contrary.







We’ve recently completed the First Annual Survey of Utilization Review in Workers’ Comp, and some of the results are a bit surprising.

Sponsored by CID Management, there were 118 respondents, both front line and executive staff. While there were some consistent findings, once again it is apparent there are rather more disconnects than one would expect.

  • Execs are one-and-a-half times more likely than the front line to report their UM/UR system is integrated with their other medical management programs (e.g., bill review, networks, pharmacy). Interestingly, this is similar to the differences between executive and front line responses that HSA found in its most recent bill review survey; most executives thought BR was integrated with UM/UR, but most desk folks did not.
  • Execs appear to be more concerned with the execution of the UM/UR guidelines/rules by the state while the folks on the front lines appear to be more concerned with the state’s poor enforcement/accountability of their guidelines.
  • When asked what UR was utilized for, front line staff were more focused on controlling claim costs while management was most focused on delivering the right care at the right time.

Among those respondents using vendors for some or all of their UR work, the average vendor has been in place for five years – however most don’t see much of a barrier to switching vendors. In fact, two-thirds of both groups believe that it is neutral to very easy to make a UM/UR vendor switch. Further yet, approximately a quarter of both the FL and the EXs stated that it would be not hard or very easy to make the switch.

There’s much more detail to the Survey; we’ll be presenting results, and you can get a copy of the Survey Report, at the NWCD Conference in Las Vegas next month.  The presentation and Q&A will be held at CID’s booth; I’ll be posting the schedule next week.



Smarter patients = fewer procedures = lower cost

Educating patients leads to better outcomes – and lower costs.  A study found that over a quarter of the patients considering hip or knee replacement surgery decided against the procedure after learning more about the costs and consequences.

We’ll let Gary Schwitzer of HNR discuss the impact and implications below…

From a terrific piece in The Atlantic by way of Health News Review…

[the State of] Washington legislature recognized back in 2007 that decision aids are a valuable tool for improving medical care by helping patients make better decisions. They passed a law providing greater legal protection to providers who use shared decision making, rather than standard informed consent, and that law required the state to study the effects of shared decision making.[emphasis added] As part of that study, Group Health Cooperative (an integrated insurer and hospital system) gave all 660,000 of their patients access to decision aids when they were considering any of a dozen preference-sensitive treatments. They also made all of the doctors and staff watch the decision aids, and kept physicians informed of how many of their patients were choosing surgery.

If shared decision making is so wonderful, why aren’t we already using it in every hospital and every doctor’s office?

The results were striking. The paper, published in the September edition of Health Affairs, covers two orthopedic procedures — knee replacement and hip replacement for arthritis of those joints. During the year and a half immediately after they introduced the decision aids, rates of hip replacement fell over 25%; knee replacement went down 38%. Total spending went down 21% on patients with hip osteoarthritis and 12% for knee patients — not just on those patients who skipped surgery, but for the whole study population. That amounts to well over $1000 a year in true medical savings — money that can be spent on something else entirely, and isn’t just shifted from one payer to another.

Allow us to reinforce something from that last paragraph: over a quarter of patients were choosing not to have surgery once they were better informed. Looking at that one way, it’s great news: We can save a ton of money and make patients better off, just by doing a better job of targeting elective surgery. But it’s also a vicious indictment of our current practices: every day we continue not using decision aids, our medical system knowingly puts patients at risk of a wrong-patient error.

A series noted in Health News Review provides clear evidence that we Americans are the “worried well”; over-diagnosed and over-treated, often for conditions that aren’t very harmful in the first place.  The series, authored by a researcher in Australia, begins with this trenchant observation:

“over-diagnosis happens when people are diagnosed with diseases or conditions that won’t actually harm them. It happens because some screening programs can detect “cancers” that will never kill, because sophisticated diagnostic technologies pick up “abnormalities” that will remain benign, and because we are routinely widening the definitions of disease to include people with milder symptoms, and those at very low risk.”

Here’s the net.  Americans get far too much crappy information about health, health care, and treatments from media, friends, and [sometimes their] physicians.

But – and it’s a BIG BUT…

When Americans get GOOD information, they make smart decisions.


Parting can be sweet sorrow…

Even if you’ve just lost a client to a competitor.  

For those a few years removed from studying Shakespeare, “sweet sorrow” is how Juliet describes her feelings when Romeo leaves at night (the sorrow), anticipating their reunion the following day (the sweet).

Don’t walk away mad or cranky or spiteful – that’s the absolute wrong thing to do.  

People remember last impressions, and if their last memory of you/your firm/your service is a good one, you’ll benefit in the future.  Sure it’s tempting to lash out, but if you’ve gotten huffy and difficult, taken talent off the account, and pushed their requests to the bottom of the list, you’re going to have one bad reference.

If their last memory of you is poor, well, you will never know how it will hurt you, but rest assured it will.  This is a very small industry – people move all the time, everyone knows everyone else, and everyone talks to everyone.

So you’ve two options – give into your petulant side, take your toys and go home, or be professional, polished, respectful and service-focused.

Before you decide, think of what the client will say  – in the first instance, “man, those people turned out to be a whole lot different than I thought they were; they ignored us, refused to cooperate, and made the transition really difficult for me.”

Or, “gosh they were great; went above and beyond, really helped us move our business even though it was costing them money; can’t say enough good things about them.”

If you need more encouragement, there’s this.  Individuals make buying decisions, and each decision is risky.  When someone is thinking about what vendor to give their business to, they know that nothing is forever, that sooner or later the current vendor will be replaced by someone new.  If they hear you were professional and helpful when they moved the business to a new vendor, that’s a little less risk for the buyer, and a better chance you’ll win the business.

What does this mean for you?

You’ll never regret doing the right thing; you’ll all-but-certainly regret letting emotions get the better of you.

While the wait may be longer than Juliet’s overnight, the reunion will still be sweet.


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.