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.  

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!

 

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…

 

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?

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.

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