Author: Joe Paduda

Dec
6

Manufacturing’s coming back

Posted by Joe Paduda on Thursday, December 6th, 2012 | Comments

Update – And with it will come higher workers comp premium revenue.

The most comprehensive report on the resurgence of American manufacturing is in this month’s Atlantic magazine.  (Over at WorkersCompInsider, Julie Ferguson beat me to the punch on this piece – Julie has quite a bit of insight into the trend and other reports as well…

Among the many companies bringing jobs back from China, Mexico, and southeast Asia are GE (appliances), .

Manufacturing jobs are returning to America from overseas for multiple reasons (paraphrased from Atlantic and other sources) –

  • Transporting stuff in oil-powered ships is much more expensive these days; oil prices are three times higher than they were 2000
  • The natural-gas boom in the U.S. has greatly reduced US manufacturing’s energy costs; costs are much higher in Asia
  • Wages in China are rising 18 percent a year, and by 2014 wages around Shanghai will be 60% of those in Alabama.
  • American unions are changing and adapting, getting more flexible and working much more closely with management to drive “lean manufacturing.”
  • U.S. labor is getting more and more productive, reducing the percentage of manufacturing costs consumed by labor.
There’s also something much more fundamental going on here.  Manufacturers are finding out the truism that lower labor costs “win” reflects a superficial understanding of costs, and in many cases is just wrong.
Moving manufacturing overseas removed manufacturing expertise as well.  And while that didn’t seem to be much of an issue fifteen years ago, it turns out that when the people designing, building, selling, and using the appliances/machines/machine tools are in the same building or area, they can quickly figure out how to reduce materials cost, dramatically increase build quality, and streamline manufacturing, further reducing cost.  Moreover, the cycle time can be drastically shortened as well.
That’s becoming increasingly important as products’ life cycles have dropped from seven to two years.
What does this mean for you?
While manufacturing is returning, the working conditions, safety issues, injury types and risk management of all of the above won’t be the same.  There’s much more automation, much less “manual” labor, and different risks than there were back in the day.
Be ready.

 

Dec
6

Solving work comp physician dispensing, one bill at a time

Posted by Joe Paduda on Thursday, December 6th, 2012 | Comments

It’s been a week of focus on pharmacy, so forgive one last post on the subject.

Now that Illinois has joined CT MS AR SC GA and a host of other states that have addressed the outrageous practice of charging unconscionable prices for physician-dispensed repackaged drugs, what’s to be done in other states that have yet to stop the practice?

I’m talking Florida, Maryland, North Carolina, Hawaii, where some politicians have blocked fixes, or the regulatory process has yet to gain traction.

It is quite likely that dispensing companies are experiencing a significant cash flow crunch. They didn’t expect Illinois to end upcharging for repackaged drugs, and their projections of millions in revenue from the Land of Lincoln are now shattered.

An increasing number of payers are applying retail pharmacy rates to bills for physician-dispensed scripts in Florida – slashing reimbursement to a fraction of dispenser’s billed charges.

This latter approach is also being employed in Maryland and a couple other states where payers are increasingly fed up with politicians’ votes allowing dispensing of repackaged drugs.  The pols’ favoring of huge out of state contributors over taxpayers and employers has yet to cost them politically, but in the interim some payers are refusing to pay the tab, and are disputing dispensers’ bills thru adminstrative processes.

Sure, payers may well lose some disputes in some states, or perhaps many in many states, but the pressure they are bringing to bear is hurting dispensers and their enablers and owners.

The mood inside dispensing companies’ office must be very angry, extremely frustrated, and even shocked that employers and payers are finally refusing to pay their bills. If you listen carefully, you can almost hear their shrill whining…”Who do they think they are? How dare they not pay us what we want when we want?! Don’t they know they have to?!”

To which I would answer:

We are the fiduciaries responsible to our policyholders; We pay what we are legally obligated to pay; We’ll rely on the legal system to tell us what to pay, not some profiteering plunderer’s made-up bill.

Feel free to quote me.

Dec
4

So you think you know work comp claims?

Posted by Joe Paduda on Tuesday, December 4th, 2012 | Comments

Sign up for Mark Walls’ seminar and find out if you really do.

I’d especially recommend potential investors, vendors, and service providers who sell to or work with or interact with workers comp claims adjusters and organizations sign up for Mark’s presentation.

That said, understand Mark will be talking about how claims should be handled, which may – or may not – bear much resemblance to how certain claims adjusters actually handle claims.  Nonetheless, those who want to understand the role of claims, and interaction of claims and related areas (managed care, investigations, litigation, technology, providers) would be well-served to sit in.

 

Dec
3

The latest work comp fraud

Posted by Joe Paduda on Monday, December 3rd, 2012 | Comments

WorkCompCentral reported [sub req] this morning that a Pennsylvania County was defrauded by its risk manager to the tune of $490,000.  The County’s TPA (Inservco, owned by Penn National) paid $490,000 for fraudulent bills approved by Dauphin County’s risk manager.  The  County discovered the scam when the risk manager, Garry Esworthy retired and the county reviewed the bills and payments to a company he’d set up in his wife’s name.

While there’s plenty of embarrassment to go around, it appears that the scam was easy to perpetrate.  As the risk manager, Esworthy had the ability and authority to approve payments for bills processed by Inservco.  He set up a company in his wife’s name, and submitted bills to Inservco. The TPA processed the bills, then sent them to Esworthy for approval.  Once he signed off, the checks were cut and sent to his account.

The scam was discovered after he retired and a County official looked into some of the bills and became suspicious.

Evidently Inservco is not to blame in this case. WorkCompCentral’s Mike Whiteley reported that earlier this year Inservco “came under fire from New Jersey State Comptroller Matthew Boxer, who said the company failed to disclose “side agreements” with bill repricing vendors it hired as TPA for the New Jersey Sports and Exposition Authority and for a city, county, and school district in New Jersey.” (the NJ Sports and Exposition Authority is a former HSA consulting client)

Boxer released an alert indicating “New Jersey governments could be wasting taxpayer dollars if they don’t closely monitor companies they hire to administer workers’ compensation claims…”

 

 

 

Nov
30

What the Illinois repackaged drug fix means for you

Posted by Joe Paduda on Friday, November 30th, 2012 | Comments

Now that Illinois has fixed its physician dispensing upcharge problem, there’s one less target for the dispensing industry.  While that’s great for the Illini, it’s not so great for those in states where upcharging for repackaged drugs is still allowed.

That’s you, Florida.  And you too, North Carolina, and Virginia, and Michigan.

You can expect the prices for repackaged drugs to increase, in some places dramatically. With Illinois joining GA SC AR MS CT CA AZ and other states where upcharging for dispensed drugs is essentially banned, there are fewer states where the dispensing industry can still plunder employers and taxpayers.  The dispensing industry must continue to generate ever-higher margins for their owners and investors, so they are going to increase prices and push for more scripts for more claimants from more physicians dispensing.

As WCRI has ably reported, prices for drugs dispensed by Florida physicians have held remarkably stable, while prices in other state, notably Illinois, increased substantially.  There’s some thinking that the industry has purposely held prices in the Sunshine State down in an effort to remove some of the pressure to pass a legislative fix.  After spending the last two days at the Florida Chamber’s Insurance Institute and conversing at length with  legislators keenly interested in the topic, my sense is the issue will once again be front and center in Tallahassee.

One anecdote points to the extent of the problem.  A good friend from a PBM told me yesterday that one of their clients sent them a $4300 bill for a repackaged drug, and asked what was to be done.  The PBM told them:

  1. that same drug would have cost $151 at a retail pharmacy
  2. as this was in North Carolina, where the fee schedule is “pay as billed”, there wasn’t much they can do.

This isn’t by any means a rare event. It is happening every day in many states, likely even your’s.

 

Nov
28

Sally Pipes on comparative effectiveness: flat-out wrong

Posted by Joe Paduda on Wednesday, November 28th, 2012 | Comments

Sally Pipes thinks using evidence-based medicine to produce better outcomes and avoid killing patients is “rationing.”

What utter nonsense. Pipes‘ whole piece – in Forbes nonetheless -is rife with errors of fact, contortions of logic, and sloppy research.  Her highly selective parsing of others’ work is nothing short of intentionally misleading.

Here are a few of Ms Pipes’ errors.

“CER advocates say that it’s designed to correct a “market failure.” Right now, they argue, drug firms need not demonstrate that their product is better than those already on the market — only that it is effective at treating the disease it targets. Drug companies have little incentive to compare their products to those made by other firms — as they may not come out on top.”

Actually, CER advocates point to a failure of Congress and then-President Bush, not the “market”. Those elected cretins are the ones responsible for forbidding CMS from considering efficacy or effectiveness when determining how much is paid for a new drug or device (notably missed by Ms Pipes).  Yep, the 2003 Congress and Bush are the ones at fault when they passed the Medicare “Modernization” Act.

After all, why would you, dear taxpayer, ever want the Feds to care about wasting your tax dollars on marginally useful but really expensive drugs or devices?  Nope, far better to force CMS to pay whatever pharma or device manufacturers charge for stuff that might not work nearly as well as something that costs far less.

Ms Pipes goes on to find fault with CER, saying “for starters, doctors don’t always agree on what comparative-effectiveness research is actually telling us”.

No @&%$()*^.  THAT’S WHY WE NEED CER!  There’s waaay too much variation outside accepted practice norms, and this variation kills patients, drives up taxes, and increases employers’ costs.  Newsflash to Ms Pipes, some “doctors” are lousy, profit-seeking, patient-hurting, incompetent, or just plain bad.  Here’s just one example.

Next up; “Back in 2009, the U.S. Preventive Services Task Force — another government-run panel of independent experts — revised its breast-cancer screening recommendations by telling women to wait until age 50 before undergoing routine mammograms. Previously, the group had encouraged women to start mammograms at age 40.

One reason the Task Force cited for the change? Cost.”

As if somehow cost is bad?  Another newsflash for Ms Pipes – health care costs are out of control, largely because we do way too many procedures that we should not do. Ever heard of “entitlements”, Ms P?

Also note cost is only ONE FACTOR. Increased risk of cancer from too many radiation screenings received much more attention – as it should.

Why is Ms Pipes so blatantly, obviously, completely in error?   Perhaps an inability to grasp basic concepts of high school science is to blame, or maybe she has really poor reading comprehension.

Of course, neither is the case. Ms Pipes just chooses to ignore facts that run counter to her ideology in favor of made-up conclusions based on nothing more than her ideology. .

Shame on you Forbes.  Your corner of the mainstream media is indeed in decline.

Nov
28

Pharmacy pricing up – driven by brands

Posted by Joe Paduda on Wednesday, November 28th, 2012 | Comments

Prices for brand drugs were up 13 percent in Q3 2012 from Q3 2011, while generic prices actually decreased 21 percent.  

That’s the headline from Express Scripts’ just-released drug trends report, which attributes the huge price increase to brand manufacturers seeking to maximize profits before their popular drugs’ patents expire. The good news is increased generic utilization helped keep total drug costs relatively flat.

Several specific drugs saw even larger increases.  Drugs to treat Hepatitis C (not uncommon in workers’ comp, especially for health care workers) had the largest specialty spend increase, 117 percent.

To give you a frame of reference, ESI’s total annual drug spend is slightly more than $800 per person.

Utilization was up 0.7%, while prices (overall) increased 2.8%.  Combining utilization and price produces cost trend.

A quarter of drug costs are for antidepressants and mental/neuro disorder medications.

Notably, opioids and narcotics represent a very small percentage of ESI’s total spend, which is based on group health, medicare, medicaid, and other lines.

Nov
27

Niches in work comp medical management

Posted by Joe Paduda on Tuesday, November 27th, 2012 | Comments

Reflecting back on the Vegas comp conference (perhaps the best one in recent memory), what struck me most was the significant increase in companies focused on seemingly ever-smaller niches in the medical management space.

Perhaps it’s partially driven by the rather stunning success of MSC after they dumped their pharmacy business, along with the growth of MSA firms (and all their sub-species); MedRisk, Align, and PBMs; the acquisitions of transportation and translation firms, dental specialists, and imaging companies; and the sudden (!) understanding that pain management is really, really important in work comp.

Regardless, I must’ve picked up a dozen business cards from various individuals who are investing/starting companies/focusing/seeing opportunity in various niche areas, including dental, pain management, addiction/dependence, imaging, DME, IMEs, and home health.  Some were pretty/very sharp, with tight understanding and deep knowledge, while others just had an idea and had little idea of what to do or how to do it or who would pay for it or what they’d pay – but gosh, there sure is an opportunity!

While there’s no doubt there are lots of opportunities, there’s even less doubt turning opportunities into revenue is a very tough slog requiring discipline and tight focus.  Here, in no particular order, are a few recommendations/observations about building a niche business.

1.  No one cares about your company or you or your idea.  They really don’t.  What they DO care about is their personal individual unique pain point – that’s what’s important to them. Don’t waste their time with descriptions of your business.  If you can address their specific pain point, you have an opportunity.

2.  Listen don’t talk.  Ask don’t tell.  When in doubt, ask it again. Figure out exactly what their issue is, how it relates to your solution, then ask what their opinion is.

3.  Lunch is not business.  A meeting is not progress.  A contract is not meaningful.  What is meaningful is revenue, services delivered, bills sent and paid.  Don’t get caught up in having meetings.

4.  There are lots of reasons potential buyers will use bigger, more established companies, most of them quite reasonable.  If you are to succeed, there has to be a compelling, customer-centric reason for a prospect to use your’s.  You can’t be as good as, you have to be better – with better defined by that individual prospect.

5. While niche companies can – and usually do – a much better job addressing the specific service area that is their focus, often that area is so small that a big reduction in cost won’t move the proverbial needle.  Drugs are about 12-14% of spend, PT about the same, imaging around 5%, DME and home health a few percent each, and transportation and translation perhaps a point or so each.  Saving a payer 20% on their DME isn’t going to be meaningful in terms of the combined ratio, but it may be very meaningful for the individual at the payer tasked with addressing that area.  But she can’t solve her problem unless your solution can actually be implemented and used.

 

Nov
21

Employers in Illinois have much to be thankful for

Posted by Joe Paduda on Wednesday, November 21st, 2012 | Comments

As of yesterday, employers won’t have to pay outrageously inflated prices for drugs dispensed to their injured employers.  Until the legislature approved regulations capping drug prices for repackaged drugs, employers’ workers comp drug costs had been increasing at an astounding rate.

The regs now require insurers to base reimbursement for physician dispensed repackaged drugs on the price of the drug before it was repackaged.  Here’s the new language as published in the Illinois Register:

“If a prescription has been repackaged, the Average Wholesale Price used to determine the maximum reimbursement shall be the Average Wholesale Price for the underlying drug product, as identified by its National Drug Code from the original labeler.”

A big win to be sure, as physician dispensing companies, their investors and enablers were making millions in Illinois doing little more than taking pills from one bottle and putting them into another. The result? In Illinois, costs for physician dispensed drugs went up more than twice as fast as the number of scripts, because physicians dispensing medications raised their prices dramatically. According to a WCRI study, while the price of Vicodin purchased at a retail pharmacy dropped 2 percent over a year, physician dispensed Vicodin went up 66% over that three-year period.

I won’t get into how employers were able to defeat the efforts of physician dispensers, their investors and enablers to stop the new regulation except to acknowledge this would not have happened without

Lest we get too complacent, realize this is but one state out of 50. The repackagers and their enablers will continue their efforts in Florida, Hawai’i, Michigan, and everywhere else to keep sucking money out of employers and taxpayers to pay big dividends to private equity firms, buy corporate jets and fancy cars.

For now, congratulations to the good guys.  Then back to work on Monday.

Nov
20

Compounding pharmacies – it’s not just about steroid deaths

Posted by Joe Paduda on Tuesday, November 20th, 2012 | Comments

An excellent piece by a couple gentlemen from Liberty Mutual describes the myriad problems with and risks of compounding medications – over and above the disastrous faulty steriods from the New England Compounding Center.

A few highlights:

  • “oversight of compound medicines actually is minimal…And as with any industry that has minimal regulation and oversight, there is great potential for fraud and abuse. The lure of possibly significant profits also is helping drive this fraud trend.”
  • “these drugs do not use the standard national drug codes (NDC). This lack of a standardized coding allows unscrupulous providers to easily double bill payers for the same medication. Also, the absence of NDC codes generally does not allow for payers or administrators to apply drug utilization edits to incoming compounded bills.”
  • “The FDA does not require pharmacies to report adverse events associated with compounded drugs. Based on voluntary reporting, media reports, and other sources, the FDA has become aware of over 200 adverse events involving 71 compounded products since about 1990.”

There’s much more at the link.

Thanks to Sarah Sellers, PharmD, for the tip.