Insight, analysis & opinion from Joe Paduda
David Williams’ edition of Health Wonk Review is focused on real world issues, problems, and challenges.
From ACA enrollment challenges to fixes therefore, to face replacement surgery, it’s all here in HWR.
Headed out on a much-needed vacation; MCM will be on hiatus till the middle of next week.
Here’s a few items of note that came across the virtual wire over the last few days.
Mylan’s EpiPen Disaster.
In the story-that-will-not-die, EpiPen manufacturer Mylan continues to dig its hole deeper and deeper. The latest news – the actual cost to make and fill an EpiPen is less than 10% of the product’s actual price. And may be as low as four bucks – for a $300 injector.
Of course, when you need an EpiPen, you really, really need one – and could not care less what it costs. (it is used to reverse the most dangerous symptom of anaphylactic shock – asphyxiation)
But there are so many hands out in the EpiPen distribution chain, all making a margin as the product works its way down to the end user. Most striking is the rebate Mylan likely pays to the insurer – one estimated by the estimable Adam Fein at around 40% of the product’s list price.
Now Mylan CEO Heather Bresch is providing all of us a lesson in how NOT to respond when confronted by reporters asking about price increases and huge compensation packages. Bresch said, and I quote: “No one’s more frustrated than me.”
That takes some balls – and a whole lot of cluelessness.
The parents who can’t afford to replace their kids’ EpiPens every year when they expire and have high-deductible plans so they pay the $600 out of pocket might be a touch more “frustrated” than Ms. $19-million-a-year Bresch.
Beyond that, there’s a nastier, uglier, and way bigger problem here. Health care in this country is a for-profit business, and Mylan is operating in the best interests of its stockholders.
And no, the “free market” won’t solve this issue – markets don’t care about people.
Provider consolidation continues
CMS’ changes in reimbursement are driving adoption of IT systems designed to track and report patient encounters with a focus on quality metrics. These systems are expensive, difficult to implement, and require ongoing updating and maintenance.
More consolidation does not mean more efficiency or cost-effectiveness…in fact some data indicates costs go up.
Implication – more sophistication in billing, electronic medical records (EMR), coding and contracting means payers will find smarter and more knowledgeable negotiators across the table, and more sophisticated billing.
Work comp rates keep coming down
California, North Carolina, Kentucky, Tennessee all are joining the states that have announced decreased work comp rates. I know Florida’s getting all Sunshine-y for plaintiff attorneys, and payers are in a justifiable uproar about that, but that’s an anomaly.
Implications – good news for employers and taxpayers, bad news for opt-out.
Which remains a “solution” (and a pretty poor one at that” to a problem that doesn’t exist.
Okay, gotta run. see you next week!
Two people very close to me are on the front lines of the opioid disaster. Working in ERs and ambulances in the northeast, they see – multiple times every day – how bad it is.
You have no idea.
The toll this is taking is wide, deep, and devastating. Some public safety workers are burning out, beyond frustration and anger to a place of fatalism.
Yesterday an unconscious woman was admitted after her kids told their dad she was taking a nap on the kitchen floor. The nap was induced by a very heavy dose of benzos on top of heroin; when dad came home from work – he’s a public safety worker too – she was unresponsive.
Revived with a hefty dose of Narcan, the woman “justified” her dosage as needed due to some unspecified mental trauma.
This one example is playing out multiple times every day for every ambulance crew, in every ER, in every neighborhood. NPR’s morning news greeted me with a piece about elephant-tranquilizer Carfentanil, a made-in-China chemical that is exponentially more powerful than fentanyl, which is exponentially more powerful than heroin. Now spreading rapidly thru Ohio, Florida, and the midwest, carfentanil will soon find its way into your town.
If you think I’m being alarmist, you’re wrong.
Here’s how this is impacting us today.
This started with legitimate “prescription” drugs pushed by pharma companies making billions. Make no mistake, these bastards are the ones who started the ball rolling, a ball that has gotten ever-larger and is crushing more and more of us as it picks up momentum.
The great late David DePaolo penned a piece on Purdue just days before he died. It’s well worth reading, and remembering.
But the disaster unleashed by Purdue and their ilk is way beyond what any of us thought it would become. As powerful and necessary as the Surgeon General’s letter to physicians is, it is so, so late.
Will this epidemic be solved by public health measures far greater than anything we’ve thought of or funded to date, or, like smallpox among Native Americans or the Plague in Europe, is it fated to burn out only after it kills most users, leaving no one else to infect?
Have a great weekend.
WCRI’s report on variations in hospital outpatient costs is yet more evidence of the wide and seemingly nonsensical variations in work comp regulations, fees, payments, and practices among and between states.
Among the findings:
There’s a wealth of information in the report; here’s my takeaways.
Captain Obvious Alert.
In many states, workers’ comp is a huge profit generator for hospitals and health care systems. Anyone following the drama in Florida surrounding “negotiations” around facility reimbursement in past years saw this play out in vivid color.
Hospitals are almost always much more politically influential than workers’ comp stakeholders, giving them a decided advantage in influencing legislation, and sometimes regulation as well.
As Medicaid and Medicare continue to clamp down on costs, hospitals and health care systems will get even better at maximizing revenue from workers’ comp. Moreover, network discounts provided to workers’ comp payers are fading as payers realize the opportunity inherent in comp, and work comp PPO contractors confront the “yeah but you’re only 1 percent of my revenue” argument.
There is an entire industry devoted to revenue maximization; claims adjusters and bill review folks would be well-served to brush up on the techniques used by these folks. Here’s just a couple examples from quick research…
Considering the dollars paid to facilities and hospitals account for at least a third of work comp medical spend in most states, this is a big problem.
So, what to do?
Kudos to WCRI’s Olesya Fomenko and Rui Yang for their work – they’ve taken a shipload of data and turned it into information that’s understandable – and actionable.
Not much, at least according to workers’ comp legend Frank Neuhauser. In an article published in last month’s Perspectives, the IAIABC journal, [sub req] Neuhauser argues that workers’ compensation is no longer needed for 90% of America’s employees, as the workplace has become safer than the non-occ environment.
Noting that the occupational injury rate has dropped precipitously over the last 25 years, he draws a contrast between today’s occupational risks and those extant 100 years ago when workers’ comp was just a few years old. This contrast is so compelling that Neuhauser makes the case that workers’ comp insurance is superfluous, unnecessary as the risks are so low in our largely service economy. Further, he makes the case that this safe workplace is one of the primary reasons to do away with work comp. Moreover, the medical care that would be needed for those few injuries that do occur can be delivered via health insurance, while disability coverage can simply be added to workers’ existing short- and long-term disability.
I find Neuhauser’s case far from compelling. In fact, it is so far-fetched at least one very knowledgeable colleague wondered if Neuhauser had penned the piece just to provoke discussion.
If that was his mission, it was accomplished. At today’s Maine Workers’ Comp Summit, all panelists at the Think Tank disagreed with the central premises of Neuhauser’s case, raising multiple objections to his data and logic. Here are a few.
Pennsylvania Judge David Torrey succinctly addresses many of Neuhauser’s arguments, bringing a much-needed legal perspective.
The net? Sorry, Frank. Work comp is here to stay.
And those two often don’t match up very well.
Example. Work comp insurance companies benefit when medical and indemnity costs are lower than expected. So, lower medical costs = better “outcome” for the company.
Many – if not most – managed care executives are evaluated in part based on “network penetration” and “discount below fee schedule”. Thus, the more dollars that flow thru their network, and the deeper the discount those providers give the network, the “better” the executive’s performance is.
Superficially, this makes sense – more care thru lower cost providers equals lower medical cost, which benefits the insurance company.
“Superficially” being the key word. Here’s the problem with this model.
Insurers contract with PPOs, which in turn contract with providers to deliver services at a discount. Most PPOs get paid a percentage of the savings that is delivered by that discount, typically 15 to 22 percent of the savings. So, the more the PPO ‘saves’ the more it makes. On the surface, this sounds good: the system rewards the PPO for saving money and does not pay it when it delivers no savings.
Under a percentage-of-savings arrangement, reducing total medical cost is ignored in favor of saving money on unit costs. The PPO gets paid for savings on individual bills. Therefore, the more services that are delivered and the more bills generated, the greater the ‘savings’ and the more money the PPO makes.
The system encourages over utilization because it is in the PPO’s best interest financially to have numerous providers generate lots of bills for lots of services. Also, the providers, squeezed by a per-unit fee schedule that is lower than fee schedule/Usual and Customary Rates (UCR), have a perverse incentive to make up for that discount by performing more services.
The fact is few carriers, TPAs, or employers have realized that per-bill ‘savings’ is the wrong way to assess a managed care program – or the executive running medical management. And unless senior management changes their evaluation methodology, their managed care departments will have no incentive to change their program to one that actually does reduce total costs.
This is by no means the only example out there; I’m quite sure you can come up with more than a couple off the top of your head.
What does this mean for you?
Take the time to understand – really understand – what success is, and what drives success. You may be unpleasantly surprised to learn your execs’ motivations are diabolically opposed to your company’s success.
Insurance folks decry the difficulty inherent in operating in multiple states, each with their own rules, requirements, standards, and demands. It would be all so much easier if there was one national standard, and some would argue this would make for a “fairer” system.
However.
States have the Constitutional authority to oversee and regulate most insurance functions. While federal legislation and resulting regulations can – and do – supercede State laws (think voting rights, interstate speed limits, education standards, firearm background checks), to date states have been left pretty much alone when it comes to workers’ comp.
Is that going to change?
I think not, but reasonable people can make a good case for some national standardization – which would almost certainly require Congressional action. Of course, given Congress can’t even bother to authorize spending to deal with the opioid disaster or take action on Zika, something as tiny and non-problematic as workers’ comp is not likely to get any Congressperson’s attention.
Here’s where it gets ideologically sticky.
Folks who normally favor small, limited Federal government find themselves advocating for national standards to streamline work comp for insurers and employers. The hodgepodge of state regs creates a whole host of inappropriate incentives;
Those just scratch the surface; talking with Bob Wilson yesterday about this, he noted many payers are most frustrated by EDI rules and regs. Set up in an effort to normalize state requirements around a set of national standards, Bob noted many states seem to have a need to tweak things just a bit here and there. Once that begins, there’s no such thing as “standard”.
What does this mean for you?
Ideology sometimes conflicts with reality.
Not to rub it into my friends and colleagues who are “working” in Orlando this week, but here in Montana it is 73, dry, sunny, and the mountain views are spectacular. Of course, flying into Bozeman isn’t nearly as…challenging as the obstacle course of strollers, elderly folks (my mom is 95, so don’t flame me), clueless travelers, little-kids-running-in-circles and mouse-hat-wearing families that is MCO.
While the attendees at the Montana Governor’s Conference on Workers’ Compensation won’t be partying to ThirdEyeBlind, these westerners have just as much fun at their annual confab as anyone. Some have even more. Film at 11.
I’m sure Bob Wilson will report back after his keynote talk here tomorrow; in what might well be a preview of the Clinton:Trump debate the esteemed WorkCompKing and I will be on the stage discussing matters of great import. As we are the last session before the cocktail hour, don’t expect us to run long.
On to more serious matters. And not much is more serious than the goings-on in California these days.
In California, we’ve learned that a big chunk of the liens filed are the work of individuals convicted or criminally indicted. A total of $600 million in liens fall into this category, with a total of $2.5 billion – yes, that’s with a “B” – filed by “68 businesses comprising the top one percent of lien filers [who] filed more than 273,000 liens totaling $2.5 billion in accounts receivable on adjudicated cases between 2013 and 2015.”
The Department of Industrial Relations’ summary goes on to note:
The assignment of liens by service providers to those who file and collect on liens are, in essence, the buying and selling of injured workers’ treatments and fertile ground for presenting fraudulent claims. DIR’s review of filing dates indicates that lien claimants tend to wait until after the primary case is settled rather than seeking early resolution of medical necessity.
My interpretation – these scam artists are waiting to file until AFTER the claim is settled because they know full well the fiduciary just wants the damn thing to go away, doesn’t have the resources to fight each and every lien, and is better off paying off these crooks than fighting them.
These people add no value, deliver no service, help no one, and want to get paid for it.
Here’s hoping California’s legislature jumps on this issue, prohibits lien filing by criminals and for denied claims. Time is short…
Staying west for a minute, the fine folk at CWCI (Stacy Jones in specific) just published their evaluation of medical fees post-reform. A main takeaway:
The amount of the reductions [below pre-reform utilization levels] varied by the type of care, ranging from 11.4% for radiology services to 49.5% for medicine services (comprised primarily of ancillary services such as cardiovascular, nerve and muscle testing, and psychiatric testing and psychotherapy), with an overall reduction of 17.7% in all medical services. At the same time, changes in total amounts paid under the schedule ranged from a 44.9% reduction in medicine services to a 12.7% increase in physical medicine services, for a net reduction of 14.3% in payments for all services. [emphasis added]
The implication is this – adoption of Medicare’s fee schedule has increased the volume of and reimbursement for cognitive services – talking with patients, rehabbing patients – and a reduction in payments for doing stuff TO patients; MRIs, nerve tests and the like.
This is good.
Thanks to CWCI’s Bob Young for the info and background.
Housekeeping
The systems folks who do all the IT work on ManagedCareMatters updated our WordPress to the latest version last week, which led to a deluge of bounced emails from former subscribers with dead email accounts. I’ve been ever-so-slowly cleaning up the subscriber list: this is a highly manual process, requires individually deleting a lot of addresses, and I’m absolutely sure I’ve screwed up and deleted addresses I shouldn’t have.
So, sorry about that.
This is going to take a little while, and in the interim I’m not going to be able to post as often as I’d like. Hope to get this cleared up by the weekend, or I’m stuck sitting in front of a computer while my lovely bride and friends cavort on the lake.
Grrr.
And that’s just part of Jason Shafrin’s August edition; from premium increases to Christian health plans; from not enough regulation to dumb rules; from formulary exclusions to OSHA penalties, click here for your guide to all that’s worth Reviewing.
For the last five plus years, the investment community has been all over workers’ comp services. Lately, not so much.
What’s going on?
From PMSI’s purchase by HIG to APAX’ acquisition of Align and One Call to form One Call Care Management, from Onex’ buyout of York Risk Services to United Healthcare’s purchase of Helios, there have been more than a score of meaningful transactions. And that’s not counting the “tuck-in” deals such as MSC’s purchase of TMS, or One Call’s acquisition of MedFocus or EXAM’s dozens of deals to acquire small IME firms.
Of late, the transaction flow has slowed to a trickle, and the reasons for that change are well worth considering.
Before we jump into that, let’s review why work comp was so intriguing to investors. I’ll summarize:
Here’s what’s changed.
That doesn’t – by any means – imply that there isn’t still significant interest in the workers’ comp services space. I am aware of four separate transactions that are in various stages, two of which have significant implications.
In addition, the debt markets, especially those firms that buy existing debt, remain pretty heavily engaged. I’d expect this to continue.
Rather it implies that investors’ interest has “matured”, they have become more selective and more discriminating.
This is good.
What does this mean for you?
Smarter buyers will lead to better service providers.
