Workers comp hospital costs – perspective from Indiana and Virginia

After Dr Barth’s high level background we dove head first into the details of hospital costs and trends and management thereof.
Indiana’s Linda Hamilton shared insights into hospital cost regulation in IN, a state with a rather inadequate cost control history. Hamilton noted the substantial increase in providers appealing work comp payments for their services. A usual and customary state, IN has seen rather significant hospital cost growth, perhaps in part due to the lack of comparable hospital charge data on which to base “usual and customary”. Many of these were addressed by paying bills at the 80th percentile, However as there wasn’t adequate comparable data, the state didn’t really know on what to base payment.
As a result, the cost of inpatient care went up 93% from 2003-2007, and there is no real solution in sight.
Hamilton showed slides indicating wide variation in the cost for similar services within the state: neighboring states are seeing much lower costs. That’s one reason medical costs account for 75% of losses in the state.
If you are expecting a happy ending you’ll have to keep that patience cap on…However Hamilton did note that the state is working on a certified database to help address the difficulty in ascertaining an “appropriate” reimbursement.
Mike Paladino, a WC claim and management exec from a health care system in Richmond, then entertained the audience with a revealing view of the financials of his system.
75% of their revenue is government paid. Paladino asserted that Medicare and Medicaid both reimburse below the actual cost of providing those services; medicare at 80% of costs and Medicaid at 94%. Clearly the health system has to cover those shortfalls by getting private insurers – and workers comp – to pay way more than cost.

A thoughtful and knowledgeable speaker, Paladino noted the services provided by the system benefit society as a whole. He did not claim that the cost shifting that occurs at the system is good bad or indifferent, but it is absolutely clear that it occurs.
My takeaway?
This is a hidden tax on employers and burden on taxpayers and insurers.


The WCRI Conference – what to expect

Following close on the heels of the National Work Comp Conference is the annual educational get-together put on by the Workers Comp Research Institute in Boston. This year marks the 28th (or perhaps 29th) edition; the agenda reflects how this industry has evolved over those three decades.
I caught up with WCRI Executive Director Rick Victor yesterday to discuss the conference and get a bit more detail on what’s going to be shared with attendees.
MCM – What are the goals of the conference?
Rick – We are focused on most important issues e.g. narcotics, use and cost of medications, and other cost drivers. We want attendees to come away with hard evidence of the nature of problem and information about solutions, including hard data on their effectiveness.
MCM – Any changes this year from past?
Rick – The format continues to evolve; it is a pretty robust mix of research and includes practitioners who don’t always agree with each other or with WCRI. We think it is important to not stack the deck.
MCM – The agenda has a strong focus on pharma – why and what’s driving it?
Rick – We try to align our research agenda with very important national issues like abuse and diversion of narcotics; as you know this far transcends WC and is a national public health crisis. Public policies about pharmaceuticals in WC are about 10 years behind medical policies and medical utilization, and this needs to change.
Some of the actions that public officials have taken about narcotics are not very well informed and not very sophisticated; there ought to be good opportunities to address this issue, if they have good info to make good decisions. Moreover, public decisions don’t make it easy for payers to get into they need to identify abuse and diversion; our research might help public officials to make better decision about what tools are appropriate.
MCM – There’s a session re hospital expense – what will we learn?
Rick – We see in WCRI’s CompScope(r) benchmarking that in a majority of states hospital costs are a bigger driver than non-hospital costs. Hospital price regulation is an area that is elusive for public officials and we would like to bring a bit more light to that. We’ve developed a new tool that will be unveiled at meeting, a hospital cost index, that will make meaningful and interesting comparisons among and between states.
MCM – I note there’s a surprise ending to this year’s conference – What’s the surprise?
Rick – It’s a big issue, an ‘elephant’. Elephants are big and can be nasty, and we want to help show how you might step out of the way when the charge is occurring. We will focus on an issue that is significantly under appreciated, hopefully to move it higher on the radar screen.
You can register for the Conference here.


Work comp drugs – What works in Washington…

There has been a lot of discussion about the WCRI report on Washington State’s workers’ compensation pharmacy costs. Unfortunately a good bit of the discussion has been rather simplistic, citing some of the findings without placing those findings in the correct context.
Washington’s workers compensation environment is unique. As one of the very few (that would be three) states with a monopolistic workers comp fund, the state’s regulatory reach and control over all aspects of workers comp is broad and deep. Simply put, Washington state can dictate terms to all participants including employers, providers, pharmacies, and other stakeholders, terms that the stakeholders must comply with. Moreover, providers and pharmacies in Washington do not need to concern themselves with eligibility issues, questions about coverage or payment or fiduciary responsibility. Compared to other states, this is a markedly different operating environment for providers and pharmacies.
News stories following the study’s release of the report stressed some of Washington’s cost-containment tactics, implying that other states could replicate these tactics and thereby enjoy similar benefits. However, neither WCRI’s news release or subsequent media stories stressed that Washington is a monopolistic state with a single payer system without the eligibility issues existing in states with multiple payers (carriers, third-party administrators and self-administered employers).
For pharmacies participating in the workers comp system in Washington, the single-payer system eliminates confusion and work associated with identifying their customer’s workers comp payer. The defined formulary and coverage policies ensure pharmacies’ ‘risk’ associated with dispensing medications to injured workers is quite low as pharmacies are all but assured that their bills will be paid. Moreover, pharmacies are tied electronically to L&I, further reducing their administrative expense and workload.
This environment could not be more different than the one in non-monopolistic states, where determining coverage is a complex and tedious task often requiring multiple phone calls and letters; ascertaining formulary compliance is difficult and uncertain; and pharmacies must assume substantial financial risk for medications dispensed to injured workers.
Given the differences between Washington and almost all other states, it is abundantly clear that what works in Washington will not work in non-monopolistic states. While simplistic solutions are often attractive, they are also often counter-productive.


Docs and drugs – details on the ‘high prescribers’

I wasn’t there, but certainly heard enough about it to wish I was.
I’m referring to CWCI’s annual meeting held yesterday in San Francisco, a meeting that might well have been subtitled “Opioids and the Doctors who prescribe them”.
The report that triggered the excitement (CMS has been asked to review the information, national media has weighed in, and some in the physician community are circling the wagons and attacking the study methodology) was discussed in some detail earlier on MCM; more details on who some of the more ‘liberal’ prescribers were and what they prescribed were presented at the meeting yesterday.
As we get more information on what’s happening with opioid prescribing, the revelations are getting even more frightening, particularly the information about Actiq(r) and Fentora(r), drugs that are only FDA approved for breakthrough cancer pain. Shockingly, there were essentially no diagnoses of cancer in the claimant population
The top 10% of docs who prescribed Schedule II opioids prescribed 84% of the Actiq and Fentora ; turns out that these high prescribers were usually prescribing these drugs for back injuries. (by the way, these drugs commonly cost upwards of $3000 per month…)
Overall, about three percent of doctors treating work comp patients prescribed 65% of the Schedule II narcotics. And, more than half of these scripts were for back strains and sprains.
Meanwhile, in my own home state of Connecticut, we learned this morning of yet another physician caught allegedly using his dispensing powers to enrich himself illegally.
What does this mean for you.
It’s long past time for payers to start working together – or individually – to identify these physicians, find out what’s going on, and take action. We can wait for regulators and law enforcement to act, but in the meantime costs are going up, claimants are dying from overdoses, and the damage to society increases.


Opioids in workers comp – attacking the messenger

This morning’s WorkCompCentral had a piece by Greg Jones noting complaints by medical specialty groups about the study on physician prescribing of opioids recently released by CWCI.
I received a copy of the letter as well, and frankly was surprised – for several reasons.
What was most troubling was the statement that “Alone, the report’s findings do not indicate that there is anything inappropriate.”
I would argue that the findings absolutely indicate there is something very, very wrong going on here. In fact, a relatively few physicians are “handling the bulk of the prescriptions”; that was amply demonstrated in the analysis and results provided in the report, the details of which were discussed in detail therein.
In addition, the statement that “we are not surprised by these early findings” was quite troubling. I certainly was surprised.
Why was this not surprising to the medical society? Was it not surprising that a relatively few physicians were treating patients with low back sprains and strains for extended periods with relatively high doses of narcotics, when all evidence-based clinical guidelines do not support such treatment?
The letter suggested CWCI conduct a deeper analysis to determine whether the treatment was appropriate based on treatment guidelines.
Every treatment guideline I’ve heard of, including ODG, ACOEM, Washington State – none of them supports extended use of opiods for treatment of musculoskeletal issues. None.
I would also note that the letter called into the question the methodology itself. The author of the letter’s statement “it is clearly misleading to use
the initial diagnosis” is inaccurate
. Even a cursory review of the study
methodology reveals the researchers used a rather sophisticated clinical grouper to identify the PRIMARY diagnosis, which may well not be the initial diagnosis.
Finally, the letter asserted that others had mis-cited or misinterpreted the CWCI work, and requested CWCI somehow correct, clarify, or take steps to correct those misinterpretations. Studies are cited and discussed and reviewed and analyzed in the media and by individuals all day every day; I just don’t think CWCI has the time, resources, or obligation to monitor what everyone says about their research.
I guess is the net is I’m really taken aback by the letter.
There’s clearly abuse going on here, along with bad medicine and out of control prescribing of very addictive, dangerous medications that are ripe for diversion and abuse. I’m just very surprised that instead of taking this seriously, a medical society would attack the messenger. There’s something very rotten going on, and denying it is the wrong approach.


CWCI’s Opioids in Work Comp Study – more details

Yesterday I posted on the most recent CWCI study on Opioids in the California Work Comp system, noting that fewer than a hundred docs were responsible for prescribing 42% of the narcotic spend.
If that isn’t troubling enough, in an email conversation with lead author Alex Swedlow, I learned that the top ten physicians prescribe 17% more drugs than their peers in the top one percent of prescribing docs (93 docs are in the top one percent).
And, these top ten docs prescribe 34% more morphine equivalents than the others in the top one percent.
Recall that the top one percent of docs who prescribe narcotics are already prescribing far more than the average prescriber, so the top ten are outliers to the outliers.
Is it possible these outliers to the outliers are doing the right thing? Are they just treating the sickest, most pain-ridden claimants? Doing their best to alleviate high levels of chronic pain?
Highly doubtful. It is much, much more likely that these docs, who represent a mere one-tenth of one percent of all docs who prescribed Schedule II narcotics are a major problem, massively contributing to the addiction problem, adding huge costs to the system, and doing little to help their patients. As I said last fall in a post about CWCI’s research on narcotic usage in California’s work comp system;
“CWCI analyzed the impact of these drugs on claim costs, and found a strong correlation between increasing levels of Schedule II payments and adverse effects on injured worker recovery. Swedlow reported claimants that received the highest narcotic dosage levels had 200% higher medical costs than claimants receiving lower dosages.”
An earlier study reported by Business Insurance’ Roberto Ceniceros had similar findings:
“temporary disability claimants treated with opioids average 105 paid days off in contrast to the average of 30 days, than when narcotics are not prescribed.
The preliminary findings also show that when opioids are present in a claim, there is a 322% greater likelihood for litigation, a 264% greater likelihood for lost time from work, and 38% more likely for a claim to remain open longer and incur additional costs.” [emphasis added]
Kudos to CWCI for continuing to shine a very bright light on a very ugly problem, one that should be the highest priority for PBMs, regulators, payers, and prosecutors working in California.


Social media and workers comp

A colleague posed an interesting question last week –“does the proliferation of ‘new’ blogs, newsletters, and other internet-enabled communications vehicles pose a threat to the ‘brand’ and ‘market share’ of Managed Care Matters?”
No. In fact, the pie is growing, and it’s a better pie today than it was yesterday.

The new entrants are actually helping to expand the online media ‘market’, increasing the number of users and in many cases upgrading the conversation in the process. People who – a couple years ago – would not ever have considered reading a blog or accessing an online newsletter are now on MCM and other media outlets every day, checking to see what’s going on, voicing their opinions, taking the pulse of the market and staying abreast of their competitors.
Perhaps the most notable example of the explosive growth of social media is the Work Comp Analysis Group. Managed by Safety National’s Mark Walls, the WCAG now has over 8000 members, is constantly updated, and used by all and sundry for everything from finding out what an adjuster’s appropriate case load should be to posting jobs to coordinating social events at industry conferences.
CompTime, WorkCompWire, Workers’ Comp Insider, the dozens of state-specific WC law blogs (some of which are in the blog roll over there to your right), and the myriad other publications add a lot to the discussion.
In the olden days – three? four? years ago, most got their ‘news’ from printed media, which, while professionally assembled and of usually high quality, was limited to what the reporting staff could assemble – and the editorial staff deemed worthy of publication. Today, there is a lot more ‘news’ available a lot faster than in the old days of snail mail.
With that said, the instant news cycle – and opining on same – has it’s risks and downside as well. There’s a lot to be said for professional reporters, with high standards, specific training, and great contacts, especially when they are teamed with editors who, while working to deadline, have a LOT more time – and I’d argue ability – to consider, vet, rewrite, and factcheck than most of us in the online community enjoy.
There’s absolutely a need for that professionalism, perhaps more so now than in the past as they provide a kind of oversight, an ‘adult supervision’ role, one that adds seasoning, perspective, objectivity, and thought that may not always be present in those of us in the blog-o-sphere.


Guidelines – beyond the soundbite and marketing hype

Is medicine science, art, some combination of the two, or something else?
That’s not an idle question.
If you’re trying to get more scientific about how you practice medicine or what services/procedures/drugs/treatments you pay for, you are likely relying on clinical guidelines to help provide a little more perspective, hopefully one based on something other than best guess or generally accepted knowledge or tribal wisdom.
A recent study may well give you pause – the key finding is rather alarming – many guidelines are NOT based on solid research, but on work that is kindly described as rather more superficial.
Published in the Archives of Internal Medicine, the research found “More than half of the current recommendations of the IDSA (Infectious Diseases Society of America) are based on level III evidence [expert opinion] only.” [emphasis added] Note that the research focused solely on IDSA guidelines, which cover a relatively small fraction of all the guidelines in use today. Largely as a result of that conclusion, the researchers concluded “Until more data from well-designed controlled clinical trials become available, physicians should remain cautious when using current guidelines as the sole source guiding patient care decisions.”
This isn’t exactly new news. This from research on guidelines published in The Journal of the American Medical Association over a decade ago “Less than 10% of the guidelines used and described formal methods of combining scientific evidence or expert opinion. Many used informal techniques such as narrative summaries prepared by clinical experts, a type of review shown to be of low mean scientific quality and reproducibility.18​ Indeed, it was difficult to determine if some of the guidelines made any attempt to review evidence, as less than 20% specified how evidence was identified, and more than 25% did not even cite any references.”
The risk here is our sound bite-long attention span will lead some to use these studies to discount guidelines in their entirety, ignoring entirely the “Until more data from well-designed controlled clinical trials become available” recommendation.
Truth is there are lots of guidelines based on standards of evidence significantly higher than ‘expert opinion’. The pre-eminent organization in this area, and the one with the most rigorous standards, is the Cochrane Collaboration. And while not all will meet the randomized double-blind control methodology that most believe is the gold standard, many will indeed provide an ample and durable foundation on which to base medical decisions, treatment recommendations, and reimbursement.
With that said, there are organizations that trumpet their ‘guidelines’ as providing the basis for coverage and payment decisions, when a more-than-superficial examination indicates the ‘guidelines’ are built on mighty shaky ground.
The Agency for Healthcare Research and Quality maintains a database of evidence-based clinical guidelines; the listing is not comprehensive as many organizations choose to not submit their guidelines for business reasons. However, while not meeting the ‘gold’ standard described above, the standard employed by AHRQ is far superior to that of “expert opinion only”; AHRQ requirements include “Corroborating documentation can be produced and verified that a systematic literature search and review of existing scientific evidence published in peer reviewed journals was performed during the guideline development.” (while their science is solid, they really need to get some English majors involved in the whole writing thing…)
What does this mean for you?
If an organization or vendor is touting their medical criteria or guidelines, prepare – and ask – pointed questions about the methodology, development process, quality of the evidence, and staffing of the effort. The good ones will be only too happy to share their work, and the others will either not know why you aren’t impressed and/or be exposed.

A thoughtful piece on ranking the evidence used in medical guideline development can be found here. [opens pdf]
Lots more info on guidelines is available here.


What’s driving comp medical costs

Two things – facility costs and pharmacy.
We’ll get to pharmacy next week (I’m finishing up the Seventh Annual Survey of Prescription Drug Management in Workers Comp), but for now here’s a couple quick hits on the growing problem in facility expenses.
Today’s WorkCompCentral [sub req] highlights the results of a recent WCRI study examining cost drivers in North Carolina. a study that indicates the “average hospital payment per claim was about $9500 in North Carolina, the highest among all the states examined. The average charge for inpatient procedures was 49% higher than the median.” [emphasis added]
Note this was back in 2007; while WCRI does good work, the nature of their process is such that the results are somewhat dated.
The fee schedule was changed back in mi-2009, lowering the cap on inpatient hospital reimbursement from 77.07% to 75%, a whole 2.07 percentage points and outpatient from 95% to 79%.
If anyone thinks this is going to make any difference at all, they’re not thinking.
Gaming the ‘percentage off charges’ ‘fee schedule’ is ridiculously easy; this nominal decrease will have zero effect on actual payments to hospitals, and thus will do nothing to lower payers’ medical costs in North Carolina, costs which, according to WCRI, wer up 9% in 2007.
The fee schedule reduction was a complete waste of time. That may not endear me to the folks who, I am sure, worked diligently to address the issue, but that’s a fact. What NC should have done was change the methodology from a percentage off charges to something much more certain and fair – a cost-plus based system would have been a good, albeit imperfect, alternative.
We need a reality check.
Workers comp will pay about $31 billion in medical expense this year.
Health care costs will total about $2.7 trillion this year
I raise this often-overlooked fact to point out that employers and insurers will not be able to rely on networks to control costs, as work comp networks have little buying power, and thus little ability to influence price per service.
Therefore, regulators have to step into the breach, and provide real, actionable, metric-based fee schedules based on something much more solid than the facility’s charges.
What does this mean for you?
Higher facility costs will drive medical expense which will drive up combined ratios – and premiums.


The cost of forgoing care

A new report documents the impact of the recession on the health care system, and for many Americans, the news is proof of what they know all too well – higher deductibles and copays are reducing their ability to access care.
The report [fee req] does not document whether the forgone care would have been necessary/appropriate/supported by evidence-based guidelines, and it is likely some of the forgone care was unnecessary. That said, it’s only ‘some’, and it is highly likely Americans with slimmer benefits, or no benefits at all, are skipping visits, medications, therapies, and operations that will over the long term will have very serious implications.
According to a piece in the NYTimes, the researchers reported “We find strong evidence that the economic crisis — manifested in job and wealth losses — has led to reductions in the use of routine medical care.” 26.5 percent of respondents reported reducing their use of routine medical care since the start of the global economic crisis in 2007.
The report adds more weight to the increasing evidence that the recession, coupled with the unique American health insurance system, has had a significant impact on Americans’ ability to access care.
The importance of primary care in prevention is well documented; [opens pdf] timely use of primary care tends to reduce the need for interventional procedures such as CABG, thereby reducing cost and improving long term quality of life. Delaying or forgoing primary care will likely have the opposite effect, increasing future health care costs.
Impact on workers comp
Over the short term, this ‘side effect’ of the recession will likely increase work comp costs
and extend disability duration, as more injured workers will have poor health status due to forgone care. If diabetics aren’t controlling their blood sugar, asthma sufferers have more acute episodes, and hypertensives are taking their meds every other day, it is going to be more difficult, costly, and time-consuming to help these claimants recover functionality.
Over the long term, health reform will reduce work comp costs as many more individuals will have coverage. But until 2015 (or so), we won’t see this positive influence.