Insight, analysis & opinion from Joe Paduda

Apr
14

Moves and Implications

Posted by Joe Paduda on Thursday, April 14th, 2022 | Comments

Two things are happening that provide yet more evidence of rapid evolution in workers’ comp.

AFGroup grows

Yesterday AFGroup announced it is acquiring work comp insurer AmeriTrust. Located down the road from AFGroup, AmeriTrust is also focused on work comp and provides insurance in other P&C lines as well.

AmeriTrust started out as Meadowbrook, and grew from acquisitions over the last 25+ years. It carries an A- rating.

AIG completing transition of claims to GB

Not announced – at least externally – was the news that AIG’s internal managed care company – HDI – will be shutting its doors this summer as its functions transition to Gallagher Bassett.

This follows AIG’s earlier decision to move its internally-managed claims to the giant TPA. Notably, I asked AIG directly about this a couple months ago, and in part its response was:

AIG will continue to handle major loss and specialty claims and medical management

Evidently that is NOT the case, as all HDI employees – the people who handle telephonic case management, UR, peer review and other functions – will no longer be employed after July 1 2022 (except for a few staff who will remain on the job a bit longer).

While hair-splitting might indicate AIG meant to state medical management for major loss and specialty claims would still be “handled” by AIG, clearly that is NOT what is happening…rather GB will be assuming all medical management responsibilities in addition to handling claims.

Of course this just makes sense…you want your claims and medical management to be closely aligned.

That said, I’m not particularly enamored with GB’s medical management…there’s way too much emphasis on/use of percentage of savings-related services and fees. Notably GB has used Coventry’s “outcomes based network” for some clients – and there’s some evidence that network delivers better outcomes. (I’ve written lots about this here; briefly most employers and insurers using TPAs are not focused on the right managed care models, metrics, or incentives.)

Why this is happening…

Regular readers will not be surprised by these two events as they are simply rational moves made by payers in a declining, highly mature industry. AFGroup gains additional scale, will likely see an earnings bump due to synergies, and adds market share in some sectors/areas.

It is also one – and I would argue the smarter – of the two main ways to grow. Buying a competitor adds a lot of growth quickly, and (hopefully) at a lower price than buying share by under-pricing competitors to win share organically (by selling more business)

AIG just reduced its unallocated administrative expense and future capital investment requirements, a smart move when you expect your budget for capital investments to shrink every year for the foreseeable future.

What does this mean for you?

Grow or sell.

Apr
12

Wildly off-topic 4…

Posted by Joe Paduda on Tuesday, April 12th, 2022 | Comments

The war in Ukraine has entered what could be an even worse phase, primarily because Putin cannot afford to admit what has turned out to be a monumental mistake.

Russian rulers that screw up this bad sometimes end up dead – and not by suicide. Most recently Stalin thought he was about to be shot when the Germans invaded in 1941; Czar Nicholas II and his entire family were slaughtered during World War I.

And that, dear reader, is why Russia is “regrouping and resupplying” in preparation for a much-more-limited battle to take and hold territory in eastern Ukraine near the Russian border.

That is NOT to say this will be less intense or awful than what’s already happened – in fact the opposite appears likely. Putin has appointed a leader for his war on Ukraine – a general who oversaw the genocide in Syria, mass destruction of entire cities, towns and villages, and use of chemical and incendiary weapons against civilians.

No, this is going to be worse than we could imagine.

As far as “regrouping” goes, there’s a lot more to this than just getting a couple nights sleep, a hot shower, and some more gas and bullets. The Russians have two basic problems:

  1. not enough soldiers and
  2. a really bad supply situation.

Soldiers

There’s pretty credible data indicating the Russians suffered about 50,000 to 60,000 casualties so far – in six weeks of fighting. We don’t know precisely how many were killed, wounded, or taken prisoner, but that is a really high casualty count, so high that it renders a lot of the Battalion Tactical Groups that invaded “combat ineffective”.

Other evidence indicates Russia is trying to solve this by:

  1. calling up more recruits;
  2. using mercenaries (e.g. the Wagner group);
  3. stripping troops from other areas; and
  4. asking their allies to send fighters (Syria, Chechnya etc).

That’s not going to make much of a difference; recruits need a lot of training or they’ll just get in the way and do stupid stuff that results in them and others getting lost, hurt, in accidents, or killed.

There aren’t enough mercenaries or “volunteers” to make much of an impact.

Soldiers need a LOT of training to become effective, and mixing together units with diverse abilities requires a LOT of careful planning and oversight, two things in which the Russians have been notably lacking.

Supplies

see here.

Strategy

Russia relies on Battalion Tactical Groups, which for non-nerds is a name for a unit that includes tanks, infantry, and artillery – along with support elements (medical, logistics/transport etc). Without getting too deep in the weeds, BTGs have a ton of firepower but relatively few infantry. That’s fine when you are moving fast, but is very much NOT fine when you are stuck on roads and need infantry to protect your vehicles from enemy infantry.

Now that most of the BTGs that invaded are in pretty rough shape, Russia will have to mush together units that haven’t worked, trained, or operated together. This will be a big problem.

The other probably bigger problem is BTGs are NOT what you want to use in urban setting – all those vehicles are sitting ducks, and the lack of infantry makes them even more vulnerable. Since Russia appears committed to destroying cities, this leaves them with one option.

Sit back and level cities with rockets, bombs, and artillery.

Devastation in Kharkiv

This is why things are going to get awful fast.

What does this mean?

There will be a global food shortage that will likely lead to famine in Africa. 

Apr
11

I’m not at RIMS

Posted by Joe Paduda on Monday, April 11th, 2022 | Comments

Thanks to the friends, colleagues, and to-be-friends who’ve asked if I have time to meet at RIMS.

I gave up attending the massive P&C event years ago; it was yet another conference among several that were more useful, interesting and focused on work comp.

RIMS is more or a P&C generalist event, covering everything from cyber to terrorism (back when terrorists didn’t invade the Capitol) to marine and D&O – sure there’s a bit of comp but those sessions were pretty thin.

Instead, I find CWCI, WCRI, and NCCI far more productive – but that’s just me.

Also heading back from the Bay Area where I watched my beloved Syracuse University men’s rowing team take on the best crews on the west coast. Here’s our varsity 8 leading last year’s national champion U Washington halfway through the  course…UW won by a second…kudos to the Huskies.

Enjoy San Fran – a terrific and wonderful city.

 

Apr
6

Quick catch up

Posted by Joe Paduda on Wednesday, April 6th, 2022 | Comments

Watching our granddaughter this morning which precludes lengthy opining or research.

MedRisk is expanding

The leading physical management company in work comp added two well-respected and quite talented execs.  Sri Sridharan will join MedRisk’s C-Suite as Chief Client Officer. I’ve known Sri for more than a decade; he has one of the sharpest minds I’ve ever come across.  As Chief Client Officer he will head up account management and analytics. functions that fit him quite well

Daad McGovern will join MedRisk in the newly created position of Senior Vice President of International Operations…the company is expanding internationally and Daad will lead those efforts.

Employment is booming.

As in growing by more than 400,000 a month for the last year (well, 11 months to be totally precise).

From NYTimes

The economy has recovered more than 90 percent of the 22 million jobs lost at the peak of the pandemic’s lockdowns in the spring of 2020…

the share of adults who were working or actively looking for work rose to 62.4 percent, just a percentage point below the level on the eve of the pandemic. Among people in their prime working years, those ages 25 to 54, the return has been even stronger. [emphasis added]

That being reality, why are Americans so grumpy?

There’s concern about inflation – although wage increases are almost keeping up with those costs.

Then there’s the complaining about gas prices…which, btw, are due almost entirely to the economy recovering from COVID and Putin’s war on Ukraine.

C’mon people, we can all pay more for gas to keep tightening the screws on that genocidal murdering bastard. Think of it as our contribution to the Ukrainians…

Construction workers are among the most vulnerable to economic problems – with wage theft a major driver.

39 percent of all construction worker families rely on at least one public assistance to make ends me compared to 31 percent of all working families.  The cost to federal and state taxpayers is $28 billion.  The authors of the report attributed this high degree of reliance on low wages, wage theft and other abusive and illegal employment practices in the construction industry.

This results in taxpayers – me and you – paying more to help these people because they aren’t paid a living wage.

RTW

Solid piece from NCCI on return to work…based on interviews with several “insurance professionals”. Not surprisingly, the key factor was employer buy-in and support.  That means real, persistent commitment – which might be a big help in these days of labor shortages.

Ivermectin

Well, the final word is in – Ivermectin isn’t useful for helping patients with COVID.

For anyone who’s been following the issue, that comes as a stunning non-surprise. The study results published in JAMA are incontrovertible:

Treatment with ivermectin did not result in a lower incidence of medical admission to a hospital due to progression of Covid-19 or of prolonged emergency department observation among outpatients with an early diagnosis of Covid-19. [emphasis added]

What does this all mean for you?

Higher wages and more employment = higher work comp premiums

Science always wins.

Apr
4

Facility costs…more bad news

Posted by Joe Paduda on Monday, April 4th, 2022 | Comments

Here’s two things which will likely increase facility costs.

Becker’s reported last week that so far this year hospital and health system margins (with some very notable exceptions) are pretty crappy – down almost 12 percent month over month in February, and a whopping 42% below February 2020 (jsut before COVID).

My bet is significantly higher staffing costs are a major contributor; the giant Henry Ford system said labor costs were up 8% in February over the same month in 2021; Providence’s increase was even higher at 10%.

Couple that with a steep drop-off in health insurance coverage as COVID-related medicaid coverage ends, and you can expect facility costs to jump.

That’s because we’re going to see a lot more uninsureds seeking care at hospitals.

Medicaid is likely the single largest payer today, with about one out of every four of us covered by Medicaid.

The problem will be especially acute in states that have not expanded Medicaid – if your members/insureds/injured workers are in the orange states, you’ve already been paying a hidden tax to help pay for uninsured care delivered by hospitals.

Since states can pretty much determine who gets Medicaid, the problem is even worse in places like Mississippi that have long restricted Medicaid coverage to a very thin slice of the poor.

If you make more than 27% of the federal poverty level, you’re too rich to get Medicaid in Mississippi – which is both the poorest and sickest state in the nation.  (kudos to Louise Norris for her intel on the issue)

What does this mean for you?

Success favors the prepared. If you think you’ve got an answer to this you’re likely wrong. 

Apr
1

Work comp payers and COVID legislation funding…

Posted by Joe Paduda on Friday, April 1st, 2022 | Comments

You may have noticed President Biden’s request for $15 billion in additional funds to cover vaccines, anti-virals and other COVID-related needs failed.

Fortunately, it’s back on the table.

Unfortunately, part of the funding may come from work comp payers.

The latest news out of Capitol Hill is a there appears to be agreement on a $10 billion COVID care funding bill. While that’s a lot less than the $2 billion the Feds are spending each moth for vaccines, treatment, and related expenses, it’s a whole shipload better than nothing.

The workers’ comp angle appears to be a response to Republican concerns over where to find the funds; while some (amount to be determined) dollars will come from unspent stimulus funds, there’s an unknown gap – and Republicans will not approve the new bill unless funding is a) guaranteed and b) is not “new” spending.

Enter over-reserved and super-profitable workers’ comp…the industry’s stellar underwriting margins during the COVID era make it one of the select few sectors that thrived during COVID. That and the sense among some that the inconsistent way states dealt with presumption reduced the comp insurance industry’s costs make comp an attractive target.

From Yahoo news:

“My view is that it ought to be entirely paid for out of money that’s already in the pipeline by reprogramming it for whatever amount they can justify to get the job done,” Senate Minority Leader Mitch McConnell, R-Ky., said Tuesday.

Except…it looks like COVID funding will be fully utilized:

There’s this from The Hill:

“I don’t think the Dems would agree to offsets that would allow them to cover that. So it’s dropped down to the size that they were willing to pay for,” Thune told The Hill.

“That $5 billion piece could be easily part of the package, but they are just reluctant to repurpose funds, and there’s a whole pile of them sitting out there,” he added.

Side note – A LOT of people are about to lose health coverage as the COVID-era Medicaid funding supplement is about to expire, leaving those people uninsured (continuing Medicaid funding could have helped make up any shortfall).

The Dems a) want to keep the global vaccine program funded, while b) Republicans don’t want to spend. From The Hill:

Romney and Schumer have been swapping offers on a list of potential ways to pay for a deal throughout the week, with Republicans arguing there is more than enough to cover a bill for the full $15.6 billion.

How work comp got into the conversation is anyone’s guess; here’s my speculation:

  • Initial research indicated work comp-might have to spend billions on COVID care; that turned out to be wildly over-stated (of course researchers had very little information to go on)
  • Congress’ budget folks likely a) saw the reports and b) know the industry spent a small fraction of the “potential” costs
  • Work comp is outside federal funding or federal responsibility…politically it’s easy to spend dollars from someone else’s wallet
  • The massive profits earned by work comp payers, plus the industry’s $14 billion in “excess” reserves make this a very attractive target. 

From Politico:

“I just cannot support another round of Covid funding that just completely eviscerates our ability to be, as Joe Biden put it, the arsenal of vaccines for the world,” Rep. Tom Malinowski (D-N.J.) said. “We have to get it right.”

So, we have:

  • politicians looking to have something positive to say when they head home for the Easter break;
  • another COVID wave may be on the way;
  • a major funding gap, and
  • a super-profitable, wildly over-reserved insurance sector with little-to-no sway on Capitol Hill.

How this works out – or if it does – is also anyone’s guess.

What does this mean for you?

As the old lobbyist says: “If you aren’t at the table, you’re on the menu.”

Mar
31

a patient dies, a nurse is blamed, a prosecutor’s behavior is amoral, and a hospital escapes blame.

Posted by Joe Paduda on Thursday, March 31st, 2022 | Comments

A nurse was convicted of “reckless homicide and impaired adult abuse” after she inadvertently – and unintentionally – injected a patient with the wrong drug. RaDonda Vaught faces six years in prison

I’m pretty angry about this – and that anger is NOT directed at Ms Vaught, but rather at a grandstanding prosecutor, a negligent hospital, and a healthcare delivery system that is far less than honest with its workers and patients.

The death occurred when Ms Vaught gave Ms Murphey vecuronium instead of Versed. Sources tell me that vecuronium (a medication used as part of general anesthesia to provide skeletal muscle relaxation during surgery) is a significantly more powerful relaxant than Versed (a benzodiazepine, similar to Valium).

Okay, here’s the reality.

  1.  Medications are accessed via a secure cabinet which requires multiple steps to dispense a drug. Omnicell – the cabinet used by Vanderbilt did not have some controls that would – in all likelihood – have prevented the error.
  2. There’s no question Vaught overrode system controls – but she did so because she did not know that the drug prescribed – Versed – was only available in the generic form – midazolam – from the Omnicell cabinet. Vaught also did not know that midazolam was the generic form of Versed.
  3. Instead Vaught typed “Ve” in the cabinet’s search function – and the cabinet’s electronic system responded with vecuronium. Vaught then selected vecuronium and administered it to Murphey.
  4. The prosecutor said Vaught’s decision to override the control was central to obtaining an indictment.

In fact thousands of nurses do this – override an automated dispensing cabinet’s built-in controls – hundreds of thousands of times every year. Vaught is one of thousands who have to make decisions when the doctor’s orders aren’t easily followed – or followed to the letter. Instead they have to use their judgment.

From the Institute for Safe Medication Practices:

The hospital where RaDonda worked allowed nurses to remove certain medications via override, and it is highly likely that, prior to this event, midazolam and vecuronium had been removed from an ADC via override in this hospital. Also, it is unlikely that nurses, including RaDonda, perceived a significant or unjustifiable risk with obtaining medications via override. In fact, removing certain medications from an ADC via override is an accepted risk in healthcare and one that many practitioners take to provide care to their patients. [emphasis added]

Vaught reported the error – as is common practice – with the understanding that doing so would not result in legal action against her.

Again the ISMP:

Criminal prosecution has worrisome implications for safety. It can inhibit error reporting, contribute to a culture of blame, undermine the creation of a culture of safety, accelerate the exodus of practitioners from clinical practice, exacerbate the shortage of healthcare providers, perpetuate the myth that perfect performance is achievable, and impede system improvements.11 [emphasis added]

Vanderbilt University Medical Center selected and installed and trained staff on the Omnicell cabinet – a decision that was directly responsible for Murphey’s death. From KHN:

A lead investigator in the criminal case against former Tennessee nurse RaDonda Vaught testified Wednesday that state investigators found Vanderbilt University Medical Center had a “heavy burden of responsibility” for a grievous drug error that killed a patient in 2017, but pursued penalties and criminal charges only against the nurse and not the hospital itself

Vanderbilt took several actions that resulted in the medication error not being disclosed to the government or the public, according to county, state, and federal records related to the death. Vanderbilt did not report the error to state or federal regulators as required by law, a federal investigation report states. The hospital told the local medical examiner’s office that Murphey died of “natural” causes, with no mention of vecuronium,

Reality is Vanderbilt avoided criminal responsibility and Vaught gets the blame.

If you object to this, please sign a petition to ask the court to grant RaDonda clemency. (Thanks SW for the head’s up)

From Hospital Watchdog

Finally, there’s this.

Prosecutor Brittani Flatt’s closing argument included this reprehensible statement:

“RaDonda Vaught probably did not intend to kill Ms. Murphey, but she made a knowing choice,” [emphasis added]

What absolutely ignorant and inflammatory bullshit.

Flatt’s statement implied that Vaught might have intended to kill Charlene Murphey, a statement that has no basis in fact, was completely contradicted by everyone involved, and is incredibly insulting to Vaught. Flatt should disciplined for her egregious statement.

Moreover, there’s no evidence Vaught made a “knowing choice”, in fact just the opposite – unless the “knowing choice” she made was to circumvent controls built into the drug cabinet, a “choice” she and thousands of her fellow nurses make every day.

What does this mean for you?

Medical professionals will be a LOT less likely to report errors.

Another clear sign that our health care system needs major overhaul.

Don’t go to Vanderbilt University Medical Center.

reminder – tomorrow is April First.

 

Mar
30

Doing the right thing

Posted by Joe Paduda on Wednesday, March 30th, 2022 | Comments

Kids’ Chance has become an industry-wide phenomenon, a charity supported by insurers, employers, service companies and individuals throughout the workers’ comp world. For those not familiar with Kids’ Chance, it provides children of workers injured on the jobs with financial support for their ongoing education.

Good friend Ken Martino is President of Kids’ Chance; Ken and I connected a couple months back and he updated me on the good work they are doing. Ken noted that since its founding back in 1988, Kids’ Chance has funded over $30 million in scholarships to over 8,700 students. Ken and Kids’ Chance are always looking to do more; If you know an injured worker with a child/children that could benefit from financial support for education, here’s the link to submit their information.

More recently, over a two-year period, Kids’ Chance provided over 700 students with scholarships averaging over $4,200 each. In total, over $3 million was provided –  in just 2 years out of the organization’s 33 years of existence.

I caught up with Liberty Mutual’s Sue Mellody at WCRI; Sue is very actively involved in Kids’ Chance of Massachusetts, one of the 49 state chapters of the national organization. In addition to her day job as VP Managed Care and Tech Solutions, Sue serves on the Board and chairs the Scholarship Committee.

Sue noted that when “someone is hurt on the job, the family is impacted just as well”…an occupational injury can affect the worker’s entire family. If the worker is out for an extended time, finances can suffer. This can impact kids in a number of ways – one of the most concerning is their educational future may be in jeopardy with potentially far-reaching consequences over the rest of their lives.

The Massachusetts chapter has made a lot of progress of late, with 10 applications for scholarships already this year after a total of 4 last year. Kudos to  Sue and her committee members for making a difference…

What does this mean for you?

If you know an injured worker with children that could benefit from financial support for education, here’s the link to submit their information.

To join in and help out, here’s how you find your state chapter. 

 

Mar
25

WCRI #4 – Provider consolidation’s impact on workers’ comp

Posted by Joe Paduda on Friday, March 25th, 2022 | Comments

Is Not Good.

that’s the primary takeaway from Bogdan Savych PhD’s presentation at WCRI’s annual conference– and a lot of other work I’ve done on the topic.

Consolidation eliminates competition – although I’d posit there’s little true competition in health care services. [I’ve written a LOT about  consolidation and the impact thereof]

There’s solid evidence that consolidation actually leads to increased prices and some research indicating it leads to decreased quality.

So how has healthcare evolved – well, primary care docs shifted from mostly solo practice to employment by health systems or group practices. Note this data is from 2018; consolidation has accelerated since then.

Of course, like everything else in healthcare, it’s local…orthopedic practices in Wisconsin are much more likely to be owned by health systems than those in Delaware.

Dr Savych’s research hit on a critical issue – exactly how many workers’ comp patients do primary care docs see? – the answer is most see almost none – with just one out of every ten physicians seeing more than 10 WC patients per year. Of course orthos see more – but still not many; only about a third see more than 10 claimants per year.

There are a whole host of issues with this which we’ll get into in a future post. For now, the net is researchers have to identify the specific physician responsible for the care of and outcomes for specific patients – which is fiendishly difficult especially when that physician moves from a group practice to employment by a health system. Provider identification is the main challenge – but by no means the only one.

Case mix adjusting – the art of comparing patients with similar diagnoses (often primary, secondary, and tertiary) over time – is as or almost as hard to get consistently right.

All that said, Dr Savych noted that cost increases are due more to a shift in the volume and type of procedures than higher prices for individual services.

The initial takeaway (there’s a LOT more research and analysis to do) is vertical integration (physician practices absorbed but health systems) leads to docs providing more expensive services.

What does this mean for you?

Consolidation raises work comp medical costs.

The best way to think about this is on a state-specific basis; understand where there’s more consolidation and watch the type of services delivered to your patients like a hawk.

Mar
24

Optum vs the Massachusetts Attorney General

Posted by Joe Paduda on Thursday, March 24th, 2022 | Comments

Several weeks ago Massachusetts’ Attorney General’s office put out a press release noting work comp PBM Optum had settled a civil case by paying $5.8 million and agreeing to “implement additional procedures to prevent overcharges in the future under the workers’ compensation insurance system. Optum Rx has also agreed to cooperate with the AG’s Office regarding monitoring of future regulatory compliance.”

Several clients contacted me to get my take, and as I’m involved in audits of multiple pharmacy programs any insights into the issue might be helpful.

The net – Massachusetts’ work comp RX fee schedules’ regulations are ridiculously difficult/impossible to implement, and Optum was treated unfairly by the AG’s office.

[note I’ve spent way too much time digging into this, and it is entirely possible I don’t have the full story – largely because the AG’s office chose to be unhelpful.]

I reached out to the AG’s contact multiple times in an effort to better understand the issue; when I finally got a return call, it was, well, less than useful. The attorney told me he couldn’t say anything beyond the press release due to the involvement of a confidential informant. [that’s a pretty universal excuse for not engaging and one I found less than helpful; I wasn’t asking how the AG learned about this, but rather specifically what Optum allegedly did wrong]

here’s the key section of the AG’s press release:

The settlement, filed in Suffolk Superior Court, resolves allegations that Optum Rx, in some circumstances, failed to apply various regulatory benchmarks – like the Federal Upper Limit for Medicare and the Massachusetts Maximum Allowable Cost – to its pricing determinations for certain workers’ compensation insurance prescription drug charges.[emphasis added]

After some back and forth, in which I explained the release wasn’t clear, he informed me [paraphrasing here] that “anyone who knows the Mass work comp pharmacy fee schedule understands the significance of the ACA FUL and Mass MAC…”

I got a bit huffy with his borderline rude retort, and informed the gentleman that in fact:

  • A) I did “know” the Mass WC Rx fee schedule;
  • B) I have a pretty solid understanding of pharmacy fee schedules and reimbursement in general; and
  • C) if I couldn’t understand it, then I’m pretty sure most work comp payers and other stakeholders couldn’t either.

So, I called contacts at Optum to get their side of the story.

The net is, according to Optum – and other PBMs I’ve spoken with – the fee schedule wording is unclear, subject to interpretation, neigh on impossible to implement and therefore highly problematic.

From Optum:

  • Defining and Implementing the Commonwealth’s “Usual & Customary” definition – The provision as written is unclear and guidance on interpretation/implementation was not supplied in a manner that allowed all stakeholders to be successful.
    • 101 CMR 331.02  – “Usual and Customary Charge. The lowest price that a provider charges or accepts from any payer for the same quantity of a drug on the same date of service, in Massachusetts, including but not limited to the shelf price, sale price, or advertised price for any drug including an over-the-counter drug. If an insurer and the provider have a contract that specifies that the insurer will pay an average or similarly computed fixed amount for multiple therapeutic categories of drugs with different acquisition costs, the fixed amount will not be the provider’s usual and customary charge.”

      My take       – this is nonsensical and impossible to manage – for a whole host of reasons.
      Taking this literally, a PBM would have to A) know the amount accepted for reimbursement for B) each and every drug at C) each and every retail pharmacy. Note that the Commonwealth’s definition of U&C specifies the “lowest price that a provider…accepts from any payer…” As PBMs and other payers don’t instantly adjudicate claims and don’t know what amount a retail pharmacy ultimately “accepts” for a particular script, there is no way to comply with this requirement. [retail pharmacy bills are rarely paid on the day the script is dispensed, but paid in accordance with each PBM contract – it could be weekly, biweekly, monthly, or at another time.]Example – an Optum patient goes to Walgreens on Tuesday, gets her script for 30 tabs of 800mg ibuprofen. Did Walgreens know and transmit to Optum the lowest price it accepted for that drug on that day at that pharmacy?
      Of course not.

       

  • Understanding of contracts between the traditional triad of pharmacy/PBM/comp payor – The Commonwealth’s interpretation of how payment agreements (within the specific context of MGL c. 152, Section 13) should run between those entities is, frankly, unique in relation to how other jurisdictions operate.
    In English, what Optum is saying is the Commonwealth thinks contracts should be three-way – PBM, pharmacy, and payer/PBM customer.
    That is patently impossible; there are tens of thousands of employers and other entities contracted with PBMs, which in turn contract with thousands of pharmacies.

From the AG press release:

“Our workers’ compensation insurance system has specific processes in place to help ensure drug pricing is handled fairly, maintains transparency, and keeps costs down,” AG Healey said.

My view – well, no.

If I read this interpretation right, Massachusetts wants something no other state does to solve a problem that no other state seems to think exists.

I suspect the AG’s office is also pursuing similar litigation against other PBMs – and more’s the pity, because from what I have been able to learn, the AG did NOT handle this “fairly”.

If that’s a misinterpretation, it’s due to a lack of responsiveness and clarity from the gentleman from the AG’s office who chose to NOT be “transparent”.

What does this mean for you?

If you’re a PBM, make sure you’re on top of this.

[note – Optum is not a client, and we’ve actually crossed swords several times of late. Regardless, from what I can tell Optum did NOT attempt to drive “up costs and…unlawfully profit.”]

note 2 – happy to re-engage with the AG’s office at any time.

Joe Paduda is the principal of Health Strategy Associates

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