Insight, analysis & opinion from Joe Paduda
There’s so much going on in healthcare these days, it would be impossible to keep up, stay informed, and actually understand what’s happening and what it means for you.
(sound trumpets of cavalry charge!)
The time, energy, and pure brain power she puts into her Health Wonk Reviews means you, dear reader, get what you need to know in one easy-to-digest serving.
There are going to be disruptions, incidents of lousy patient care, and fraud eruptions. And when those hit the news, remember – our current system is not sustainable, and change is never without disruption.
What does this mean for you?
ACOs are coming, and the shift in thinking, rather than the delivery system itself, bodes well for comp.
That’s the only conclusion one can reach after reading WCRI’s latest report, The Impact of Banning Physician Dispensing of Opioids in Florida.
Here’s why.
As of July 1, 2011, Florida’s docs could no longer dispense most opioids from their offices. Before that date, 5.7% of the scripts dispensed by docs were opioids that fell under the ban.
After? 0.6%, and almost all of those were dispensed by docs outside of FL for FL claimants.
Well, we’d expect the volume of pharmacy-dispensed opioids to go up dramatically, wouldn’t we? After all, no physician would ever prescribe opioids to a patient who absolutely didn’t need them, right?
Wrong.
The volume of pharmacy-dispensed opioids declined. Went down. Decreased.
In fact, 3.5% of patients were receiving the stronger opioids from docs before the ban, only 0.5% after (again these were mostly from cross-border trips by FL claimants to out-of-state dispensing physicians). And the percentage of claimants getting stronger opioids from pharmacies went up by a mere one-tenth of one percent.
Conclusion?
Dispensing docs were prescribing and dispensing strong opioids to many patients who DID NOT NEED THEM. Why? For the money.
Opioids are incredibly dangerous. Opioids kill people. Destroy families. Ruin lives. Addict children. An intelligent, articulate, promising young woman I know is now a prostitute, selling herself to strangers because she became addicted to prescription drugs. Her family is devastated, her dreams reduced to the next high.
And these money-grubbing bastards allow this to happen, just to make money to buy nicer cars, better wines, fancier dinners.
What does this mean for you?
STOP ALLOWING ANY PHYSICIAN DISPENSING.
After a brief diversion yesterday to focus on breaking news and research, it’s back to the impact of health reform on comp, with today’s post delving in to cost-shifting.
Cost-shifting is a general term for provider behavior involving seeking more revenue from some patients/payers to make up for lower/insufficient revenue from others. The term itself is not without controversy, but we’ll set aside semantics and focus on a simple question – will Obamacare lead to higher costs for comp payers as providers seek to make up for lower/lost revenue from other sources.
The short answer is – probably not.
The longer answer is this – more reimbursed patient car leads to less motivation to cost shift, and although many of the newly insured will be low-reimbursing Medicaid patients getting 85% of cost is a lot better than 11%. Therefore, if anything Obamacare’s broader coverage will reduce the motivation to cost-shift.
The detailed answer follows…
Providers, particularly hospitals (which account for about a third of all WC medical costs) have to provide emergent care to patients without insurance. Currently there are about 50 million folks without insurance in the US; post reform there will be about 20 million (estimates will vary, but regardless there will be a LOT fewer uninsureds).
Logic implies that more paying patients is better than fewer, and more providers will get paid for more patient care next year than this, leading to less motivation for those providers to shift costs to their workers’ comp patients. The key word here is “motivation”; just because there’s less rationale for cost-shifting does NOT mean providers will suddenly decide to stop charging higher fees and doing more for their comp patients. I’d also note that it is unlikely that most providers consciously decide to alter their treatment based on their patient’s reimbursement.
However, this being workers’ comp and health care, logic doesn’t necessarily apply. Here are a couple things to consider.
First, a just-published analysis of the impact of lower Medicare reimbursement rates on private payer costs found:
“a 10 percent reduction in Medicare payment rates led to an estimated reduction in private payment rates of 3 percent or 8 percent, depending on the statistical model used. These payment rate spillovers may reflect an effort by hospitals to rein in their operating costs in the face of lower Medicare payment rates. Alternatively, hospitals facing cuts in Medicare payment rates may also cut the payment rates they seek from private payers to attract more privately insured patients.”
The analysis was based on hospital data from 1995 to 2009, a period during which Medicare hospital reimbursement was increasing quite modestly. Of course, workers’ comp was not considered nor WC reimbursement analyzed by the study’s author, so we are left with more questions than answers.
It is also important to note that almost the entire study period was before anyone had even contemplated health reform and the dramatic impact on hospital reimbursement that will follow. The world has changed dramatically, and this historical perspective may no longer provide much in the way of insight into future behaviors.
Second, private payers have a LOT more bargaining power than work comp payers and network developers; WC insurers are already seeing significantly higher facility costs (anecdotal information from HSA consulting clients). And these higher costs are coming on top of research clearly indicating comp pays a lot more for hospital services than private insurers (see results of WCRI research on outpatient hospital costs). So, comp already pays more, and until and unless networks and insurers figure out ways to better control utilization and price, they are going to continue to pay more.
Here’s what this means for you.
Third, some comp payers are beginning to figure out which hospitals are screwing them, and which are not, and doing whatever they can to direct away from the high cost facilities and to the low cost/high outcome providers. Cost shifting will continue, but these smart payers will mitigate its impact while their less-smart competitors will wonder why their medical expenses are rapidly escalating.
This just in – word is that One Call Care Management is up for sale, reportedly for a price in the $1.5 billion range.
Reuters just reported their sources indicate things are in the “exploratory” stage; if the sources are accurate, this would be the largest – by far – transaction in the work comp services business.
Odyssey Investment Partners has been carefully assembling OCCM by acquiring firms in the medical management space – DME/Home health (MSC), imaging (OneCall), dental (Express Dental), transportation/translation, ancillary services, and provider assessment/analytics (Harbor Health). Word is OCCM will soon be adding another translation firm to their portfolio; 3i is the most commonly cited target.
Odyssey has done very, very well in comp; they’ve purchased, grown, and sold York Claims/Risk and built OCCM into the largest and most profitable WC services company in a very short four years. With an EBITDA around $140 million and strong year/year growth, a 10x multiple is well within the realm of possibility.
With MSC’s acquisition just over a year old, and TechHealth to be added to the portfolio shortly, management is pressing ahead with their growth despite – or perhaps in part because of – a potential sale of the entire company.
I’d be remiss if I didn’t note this has not been confirmed by anyone at any of the firms mentioned above.
That said, kudos to OCCM, OCCM management, all the folks who work for OCCM’s companies, and Odyssey for building the first billion dollar business in work comp services.
Yesterday’s WCRI report on physician dispensing in Georgia post-reform is stuffed with insights into physician behavior and motivators thereof.
In April 2011, the Peach State capped the price of physician-dispensed repackaged drugs at the AWP of the original, non-repackaged drug, thereby eliminating the outrageous markups the docs and their enablers were charging employers and taxpayers. WCRI examined prescribing behavior pre- and post-reform; here’s my take on the more interesting results;
So, what can we surmise from the data. I’d suggest several one things.
Despite all the BS about patient care, outcomes, convenience, and access, they do it for the dollars.
Here’s proof.
There are (at least) two additional implications of more people and more workers covered by health insurance; cost-shifting, and access to care. Each is deserving of careful and thorough consideration; for now we’ll touch on the highlights and leave a deeper discussion for another time.
First, the scope. 21 percent of working-age Americans don’t have health insurance. This varies widely by state, from 31% in Texas to 6 percent in Massachusetts, with several in the high twenties. That’s more than 40 million people between 18-64.
Access to care
Stands to reason that adding 30 million to the rolls of the insured is going to lead to a lot of demand for primary and specialty care; many of the newly-insured will have foregone routine care – primary and specialty – for years. They will need check-ups, tests, drugs, evaluation and counseling. Some will need major procedures; knee replacements, shoulder surgery, stents and cancer treatment.
A lot – best guess is somewhere over half – of primary care in workers comp is delivered by family practice/internal medicine/generalist physicians and physician extenders. Many injured workers go to their ‘regular’ physician when they get hurt, and we can expect this to continue. As there is already a relationship in place, those claimants who’ve had coverage are likely going to see some delays in getting into their doc for anything other than emergent care. The primary care access problem will arise from the newly-insured; these folks likely don’t have existing physician relationships, and will find it tough to get into see a family practice doc post 1/1/2014. As a result, they’ll head to the local ER, further burdening hospitals short on capacity. Of course, their care will get reimbursed at a pretty nice rate, and smarter health systems will divert WC patients to their in-house occ med departments.
Alas, there are not a lot of “smarter health systems” when it comes to occ med…and payers will face the usual set of problems/challenges encountered when dealing with providers who don’t know much about workers’ comp.
Specialty care is where the big problems are going to be.
Orthopedic surgeons get paid to do orthopedic surgery, and there are going to be millions of newly insured patients with conditions that may justify/require surgery. Stands to reason that specialty care – particularly for musculo-skeletal conditions – is going to be in high demand. The “good news” here for workers comp payers is Medicare, and many private insurers, are doing their darndest to reduce utilization and reimbursement for specialty care. And, as WCRI so ably reported just last month, workers’ comp pays a lot more for specialty care than most, if not all other payers. While just paying more won’t guarantee priority access, it will certainly help.
So, what’s an insurer/employer to do?
1. Stop buying care based on a discount below fee schedule; identify good providers and pay them fairly – above the fee schedule if necessary (or in Massachusetts, all the time).
2. Be easy to work with. Stop bothering the good docs with pointless UR requests; have your case managers help schedule PT and MRIs instead of badgering the doc and her staff.
3. Pay quickly.
Do this all now. It’s almost too late, but if you haven’t started reaching out to key docs yet, better late than never. Let them know you value them, and want to work with them, and make sure your billing and claims departments support that intent with action.
Or, just sit around waiting to see what happens, and then, when your claimants can’t get an ortho consult for six weeks, blame Obamacare.
I’ll have to deal with cost-shifting tomorrow – too much work to do today.
Monday we kicked off the discussion of the impact of PPACA/Obamacare/health reform on workers’ comp with a review of the (very limited) direct impact of reform on comp. Today it’s the the impact of increased group and Medicaid insurance coverage on workers’ comp.
Let’s leave aside yesterday’s announcement by HHS that the employer mandate will be delayed till 2015; we’re after the long-term impact, so the one year delay will not be material to our discussion. There will be somewhere around 30 million more folks covered by health insurance post implementation, with 32% covered under Medicaid, 45% from the individual exchanges, and 23% from employers. Here are the major effects of the increased coverage…
“even repeat injury-sufferers are more likely to file during episodes in which their employer offers health insurance, but not statistically more likely to file during episodes in which they themselves are insured. This suggests that the workplace environment and employer incentives may have a significant, or perhaps even the dominant, impact on workers’ compensation filing.”
Next week — more on the impact of PPACA – bet you can’t wait!
The closer we get to January, the more interest there is in how health reform, aka PPACA, aka Obamacare will affect workers’ comp. In a meeting with a dozen industry executives last week the issue garnered much attention – as well it should.
While there are no direct ways Obamacare will impact work comp, there are a host of indirect ways it will – some of which are obvious, many rather subtle. I’ll explore the 8 “indirect impacts” over the next couple of weeks, but we’ll begin with a bit of table-setting.
First, recall that worker’s comp is tiny. Compared to the total US health spend of $2.6 trillion, comp’s $30 billion is just over 1 percent. The implications are clear – we are the flea on the tail of the dog, and a mighty big dog at that.
Second, while there is no direct impact on workers’ comp, there are a couple things in PPACA that affect occupational disease – some changes to the feds’ Black Lung program, and “LibbyCare”. The Black Lung changes are rather obscure and relate to reinstating presumption of cause and widow’s benefits provisions. Libby Care is a bit more complicated.
Some background is helpful. In the Senate, PPACA fell under the jurisdiction of the Finance Committee. The chairman of the Senate Finance Committee, Max Baucus, hails from Montana. Libby is in Montana, and Libby is the site of massive asbestos mining and manufacturing operations, and an attendant public health disaster. Not only were workers affected by asbestos-related illness, but residents in and around the town have also been harmed.
Briefly, Libby Care is the assumption by Medicare of the responsibility of providing care to Libby residents affected by asbestos and related illnesses/conditions. Victims will also receive special home care, pharmacy, medical device, and other services. The details are in Section 10323, Medicare Coverage for Individuals Exposed to Environmental Health Hazards.
While some might argue that Libby Care is the first step in some sort of federalization of workers’ comp, that is far-fetched at best. In fact, this is a powerful politician’s use of that power to serve a specific constituency; a one-time fix to a specific ‘problem’. That’s not to say that the work comp industry has done a good, or even passable, job in addressing occupational disease, but the Libby Care Amendment isn’t an attempt to Federalize management and treatment of occupational disease.
Color me a cynic if you will, but my sense is the Manager’s Amendment (technical term for the Libby Care language) isn’t so much the ‘camel’s nose under the tent’ as a political move by Sen Baucus (D MT) to curry favor and win votes.
Here’s why.
1. The Amendment requires a site be designated a “Public Health Emergency” by the Secretary of HHS. To date, Libby is the only site so designated, and the requirements for designating any site as a Public Health Emergency are stringent indeed.
2. The provision covers care for all affected residents and employees, not just workers. This is clearly far beyond ‘occupational’ and is much more of a public health issue than a work comp one.
3. Care is to be delivered through the Medicare system. This will require allocation of additional funding for each new site, something a cash-strapped CMS is unlikely to encourage.
Finally, PPACA funding includes about $20 billion from a medical device excise tax of 2.3%. This may add a few pennies to workers’ comp medical costs – but remember a) medical devices are just a few percent of WC medical costs, and b) markup on these items is already so high that another couple percent isn’t going to move the proverbial needle. While the device industry is lobbying its brains out to get this repealed, claiming it will cost jobs, hamper innovation, and bring asteroids crashing down on our heads (well, perhaps not that), a dispassionate analysis indicates this is a non-event.
Next up – the impact of increased group and Medicaid insurance coverage on workers’ comp…
Giant workers’ comp managed care firm OneCallCare Management will announce today it is acquiring Tampa-based TechHealth.
TechHealth, which has been on and off the block several times, provides a range of services – transportation, home health, DME, PT, pharmacy and imaging to the comp industry. As OCS already has a robust offering in all but two of the product lines, it may well be OCS’ owners were seeking a toehold in pharmacy and PT, while adding a bit more capability in transportation and home health/DME (I don’t see TH’s imaging as material to the deal).
With revenues well above $100 million and a solid technology platform, TechHealth will also add top line revenue and a different customer mix (heavier on the smaller-payer end) to OCM.
TechHealth got its big start serving AIG’s regional claims office in Florida around the turn of the century, the value proposition defined as relieving the adjuster of the hassle of handling the multiple services needed for complex claims.
TH grew in fits and starts, primarily by selling into claims offices with a few regional carriers and TPAs using their services on a broader scale. The one-stop-shop value prop, while appealing on its face, has yet to gain appreciable traction amongst the larger (top 20) payers. While there are several competitors with similar strategies, none has managed to become a major supplier across all (or even most) of the service lines with any of the big payers.
The OCM model is markedly different.
As the largest imaging, DME/HHC, dental, and transportation/translation supplier, it can make the argument that the promise of the one-stop shop is now reality. The addition of Harbor Health gives OCM insights into physician-ancillary service provider relationships, which it will undoubtedly use to increase the volume of services delivered thru OCM.
OCM’s model is anchored in the “original” OneCall Imaging’s expertise and deep experience in scheduling imaging; the new owners leveraged that expertise and combined it with similar services (if you’re getting an MRI, you may need transportation). The growth – primarily via acquisition – has been impressive, as OCM is now the largest single supplier of services to the WC market, eclipsing Coventry Workers’ Comp last year.
This isn’t the only deal you’ll hear about this summer; word is one – or more – of the big bill review firms are looking at a transaction, and there are at least two others expected to be announced before the kids head back to school.
What does this mean for you?
For payers, fewer choices. For entrepreneurs, an opportunity to launch something new and different, albeit a high-risk one.