I spent most of Sunday and yesterday speaking at several sessions at the Florida Workers’ Comp Educational Conference in Orlando. Nothing like Orlando in August. Also on the panels were several physicians from Florida, Gerry Sander, a PharmD from Express Scripts, George Furlong of Choice Medical Management (a client), and Nancy Brennan of SRS.
Here are a few takeaways.
1. There are a relatively few physicians – my guess is less than 15% – who are problem prescribers. These are the ones who write scripts for Actiq (a narcotic that is only approved for break through cancer pain), Oxycontin in the first month of an injury, and massive doses of other opioids and narcotics. Most of the physicians in the audience were appalled at this prescribing behavior. One physician, Dr. Richard Dolsey of Miami, noted that of the many physicians in his group, and the thousands of patients seen each year, he could not recall a single script for either of these drugs.
2. Although their numbers are small, these “bad prescribing” physicians have an impact on cost that is disproportionally high – Oxycontin and similar pharmaceuticals are the most costly drugs in WC (they account for more dollars spent than any others.)
3. One of the biggest problems with these drugs is their potential for addiction. Once addicted, the addiction treatment becomes the financial and legal responsibility of the WC payer. Detox can be extremely expensive, is quite difficult, to say nothing of the human toll on the individual and their family. One of the physicians on the Sunday panel is a pain management doc – a Dr. Silverman – he recommended a relatively new detox therapy, suboxone, administered in a physician’s office that appears to work quite well with minimal side effects.
4. Physician education is seen as a long term solution or means of addressing drug costs in WC. However, I have my doubts – the entire drug spend in WC is about $3 billion this year, which is less than what drug companies spend on direct-to-consumer advertising. Significance? Hard to penetrate the consumer or physician mind when our resources are so limited.
5. That said, the industry can adopt data mining techniques to identify potentially problematic physicians, patients, or pharmacies and adopt educational approaches targeting specific problems. These should be educational and not confrontational in approach.
The gratifying thing about the two days was the dialogue, recognition of the extent of the problem, and willingness on the part of physicians and payers to address the issues.
What does this mean for you?
Drug costs are the fastest growing part of the WC medical dollar – and perhaps the hardest to address. Start by educating yourself on the problem, and realize that many physicians are doing the right thing, and only a few are problematic.
For articles specific to drugs in WC click here.

The recent news concerning the Spitzer investigations, Broward County’s Work Comp troubles, the Arthur Gallagher payment inquiries and the adverse publicity surrounding same has caused some industry players to delay decisions regarding new initiatives. TPAs particularly have pulled back from some previous “done deals” while they re-examine their business practices, commission arrangements, and relationships with managed care firms.
I am attending the Florida Workers’ Comp Institute, and after one evening’s discussions with several vendors and TPAs the impact is obvious and considerable. Both are lamenting the delays imposed by TPA senior management.
This is a good thing. For far too long, the relationships between some TPAs and insurance companies and their servicing entities has been somewhat cloudy, with rumors of commissions, kickbacks, and other behind-the-scenes payment arrangements periodically surfacing. Now that the Broward audit and Spitzer inquiries (which include subpoenas of managed care firm Concentra and several insurers and TPAs) have shed some light on these practices, risk managers, brokers, and CFOs are paying much closer attention to these relationships.
Part of this increased attention may well be due to the potential for OFAC and Sarbanes – Oxley complications. I am certainly no expert, but the provisions of the “Sarbox” law that require CEOs to sign off on financial statements coupled with the OFAC reporting requirements (who receives funds from the corporation) appear to be playing a significant role.
What does this mean for you?
If you have always competed fairly and ethically, good things. If you have played fast and loose, troubles ahead.
Hallelujah.

Sources indicate the “rebates” that broker Arthur Gallagher & Co. has recently paid to several employers in Florida may be related to contingent commissions and/or fees paid by managed care firms to the broker. At least three municipalities have received checks, including $1.3 million to the City of Gainesville, over $1 million to Lakeland, and over $100,000 for Alachua County.
The State Attorney General’s office is heading up the investigation, and there are apparently internal inquiries under way at several other public entities. Preliminary indications are that at least one city risk manager has been “asked to resign”, and other moves are likely in the next two weeks.
According to the Attorney General’s release,
“There are indications that insurance brokers have improperly steered business to insurers who pay the brokers the highest fees rather than seeking the best deals for their customers. There are also indications that the companies may have engaged in bid-rigging. The alleged practices could be in violation of Florida’s antitrust laws, Chapter 542, Florida Statutes. Penalties allow fines of $1 million for corporate violations, $100,000 for individuals and for three times the amount lost due to illegal activities.”
Gallagher has responded to the inquiry, claiming that this is due to the actions of a single producer who no longer is associated with the firm. The statement follows:
“During an internal process review, Arthur J. Gallagher discovered an over billing discrepancy that did not follow the terms of the contracts for the City of Gainesville, the City of Lakeland and Alachua County…These discrepancies were isolated incidents handled by one AJG producer who has since been terminated…As soon as these discrepancies came to our attention, the situation was immediately rectified with the over billed amount returned and the appropriate Florida authorities notified.
While it is entirely possible that Gallagher had nothing to do with this matter other than receiving the inappropriate payments, it is indeed troubling that
a. it took Gallagher ten years to uncover this problem
b. no explanation other than a brief “we billed you in error” was provided
c. risk managers appear to be at risk over this
What does this mean for you?
Hopefully, nothing…

The Ohio Bureau of Workers’ Compensation announced that it will be significantly reducing reimbursement to hospitals . Cuts will be 21% for inpatient and 17% for outpatient services, and are slated to go into effect October 1, 2005.
Estimates of savings to BWC are about $3.3 million per month, or $40 million a year.
The cuts were the direct result of an analysis performed by a major union in the state which indicated hospitals’ most profitable line of business was workers comp. Previously, reimbursement was 70% of a hospital’s stated charges for inpatient admissions; the new rate will be 55% of charges. Outpatient rates would drop from 60% of charges to 55%.
While one has to applaud the quick action by BWC, an entity that has never been known for fast action, cutting reimbursement that is based on a percentage of charges is a highly suspect way to reduce expenses – what, if anything, prevents hospitals from increasing their charges?
Moreover, this is an across the board cut, and does not reflect any measure of outcomes, efficiency, or results. Thus the hospitals that have excellent results and performance suffer the same cuts as poorly performing hospitals.
Once again, a blunt instrument employed in the name of cost control.