Insight, analysis & opinion from Joe Paduda
I’m forced to change how we handle comments on posts. For the immediate future, please send any comments via email to me at jpadudaAThealthstrategyassocDOTcom.
The reason for the change is the proliferation of spam comments on everything from ‘fake replica handbags’ (what, is the replica not really a replica?) to anatomy enhancers to eastern european bride selection services.
I kid you not.
We’re working on a solution.
Health Strategy Associates’ First Annual Survey of Work Comp Claims IT Systems is underway. The Survey seeks input from front-line folks and execs in claims and IT, and we’ll be comparing and contrasting responses to see if – or perhaps more accurately where – there’s a disconnect or differences in opinions between the two groups.
Sandy Blunt is the brains behind the Survey; he’s been responsible for several systems selection processes and as a former CEO and COO of large comp payers, he brings a depth of experience that we’re very fortunate to have.
We’re using SurveyMonkey to collect and tabulate responses; the survey takes about 15 minutes to complete. If you are interested in participating shoot Sandy an email – his address is SBluntAThealthstrategyassocDOTcom (substitute symbols for AT and DOT).
Respondents receive a detailed copy of the Survey Report.
A brief summary version will also be available to the general public. Customized analyses of and presentations on Survey findings will be offered as well. Of course, no respondent-specific information will be provided in any version of the Survey report.
Sandy will be providing a snapshot of findings here a couple times over the next few weeks.
It’s not a crime for North Dakota state employees to use taxpayer funds to fly first class; run up hundreds of dollars in bar bills; pay for hotel rooms – then not use them; spend thousands to go to Tony Robbins seminars; pay millions to redo executive homes; drop twenty grand to go to the Presidential Inauguration; wasteful, indecent, unethical, but not illegal.
But a state employee can be convicted of a felony when his head of finance orders and pays for food for employee meetings and celebrations; discharged employees don’t pay back money they don’t owe; and the agency he runs provides employees with gift cards for motivational rewards – gift cards worth ten bucks each.
Oh, and the state employee, former state fund CEO Sandy Blunt never ordered, authorized, signed for, used, took, distributed, or otherwise handled any gift certificate. The program had been running for SIX years before Sandy arrived and the agency had a complete system running that did not include nor require his approval.
Unbelievable, but true.
That’s the situation in NoDak, where former state fund CEO Sandy Blunt was convicted of the crime for misusing more than $10,000, a sum that the prosecutor got to by adding up lots of flowers, cards, cakes, and sick leave (that had been acceptable when his predecessor authorized them) plus moving expenses paid to an employee who was fired (and, it turns out, didn’t have to pay anything back).
Yet somehow when the state university’s employees waste millions, it’s not a crime?
Can someone explain this? Anyone?
Update – parts of this post may be incorrect or mischaracterize the nature of AHCS’ business. I’m trying to get AHCS to respond to my request for information and help me better understand their business model.
Original post follows
It’s amazing what you can find out about a company these days. After my post on drug repackager Automated Healthcare Solutions last week, a couple calls inspired me to do a bit more checking.
First, how does AHCS make its money? Simple – by taking advantage of a loophole in workers comp drug fee schedules to bill exorbitant amounts for drugs, bills insurers and employers are required to pay.
An audit of Miami-Dade County Public Schools’ workers comp program determined AHCS-affiliate Prescription Partners, LLC was paid over a quarter million dollars for drugs in 2008. That’s a lot of money, but even more striking is the average cost per script; Prescription Partners; average script was $423.25, by far the highest per script cost of any supplier. Miami-Dade’s PBM had an average cost of $188.52.
Let’s talk specifics. An analysis of pharmacy data indicated Prescription Partners, LLC (AHCS billing entity) bills from 125% to 720% of fee schedule for the same drugs, with an average of about 175%. Yes, that’s right – AHCS was paid up to 6 times more than the fee schedule amount. The loophole lies in the way prices are set for drugs. As a repackager, AHCS can set its own price for drugs; repackagers are considered ‘manufacturers’ by the rate publishers and thus determine what the Average Wholesale Price is for the medications they sell.
In theory, AHCS, and other repackagers for that matter, could set their prices at a million bucks a pill. Given the rampant greed exemplified by some (again, not all) of these folks, it’s a bit surprising this hasn’t happened yet.
Its not as if AHCS or the physician practices dispensing their drugs are adding six times’ more value to the injured worker. While there is some benefit in ensuring the patient gets their drug quickly, it’s hard to see how that is worth the huge extra cost. Unless you happen to be one of AHCS’ owners, that is.
Turns out a Boston-based private equity firm bought a minority stake in AHCS earlier this year. I don’t know the folks at ABRY Partners, but I’m kinda wondering if they did their due diligence before plopping down their millions.
For example.
Gerald Glass advertises himself as a ‘medical doctor’. Which he isn’t. Glass, Founder and ‘Co-CEO’, claims he got a medical degree from Windsor University, a Caribbean academic institution. However, I found no evidence that Glass had ever been licensed as a physician in the US…
A little more investigation confirmed that AHCS was a major, if not THE MAJOR, contributor to the GOP in Florida. (this may well have occurred after ABRY’s investment) An article in the Florida Independent noted the following:
” June 16, three LLCs — Durable Medical, Orthopaedic Fellowship Group and Green Solar Transportation — with the same managers as the founders and co-CEOs of Automated Healthcare, Paul Zimmerman, M.D., and Gerald Glass, M.D., donated $500,000 to the Florida Liberty Fund. On June 22, $487,000 was transferred to the Florida First Initiative. Automated Healthcare LLC also donated $100,000 to the Florida Liberty Fund on Aug. 3; on Aug. 5, $124,000 was transferred to FFI. (Automated Healthcare did not respond to a request for comment.
H.B. 5603, a bill vetoed by Gov. Crist but supported by Florida CFO and Democratic candidate for governor Alex Sink, included provisions aiming to reduce the cost of prescription drugs in the state’s worker-compensation program. Automated Healthcare opposes the legislation, since it would likely cut into their business.”
So, less than a month after Crist vetoed a bill that would have killed AHCS’ business in Florida, AHCS contributes $600,000 to a PAC that supports Crist.
Loyal readers may recall my article last week noted AHCS gave a hundred thousand bucks to the Florida Liberty Fund; shame on me for not knowing the total was much closer to six hundred thousand dollars…
What does this all add up to?
Some repackagers are raping the system. This is nothing less than legalized theft. It is growing rapidly, and payers, and most importantly regulators, have to act.
Medical malpractice is one of the cost drivers about which there is much disagreement, some contend it is a major contributor to overall system costs, while others view med mal as a relatively minor factor.
A new study [abstract only] reported in this morning’s Health Affairs makes a compelling case for the latter view, and adds valuable insight into what is a politically-charged issue, one rife with misinformation and sloppy math.
The study found “Overall annual medical liability system costs, including defensive medicine, are estimated to be $55.6 billion in 2008 dollars, or 2.4 percent of total health care spending.” [emphasis added]
Recall total system costs are in excess of $2.2 trillion. While $55 billion is a lot of money, compared to total system costs of $2.3 trillion, it, well, isn’t much.
In fact, costs would be much higher if the real toll of medical malpractice – lousy care, incompetent providers, poorly managed facilities, was adequately accounted for. Solid research indicates the vast majority of medical malpractice problems are never litigated. One study indicated that the cost of ‘adverse events approached 5% of total health care costs; over a hundred billion dollars in today’s world.
The med mal reform issue has been raised by opponents of health reform, who contend the failure to include med mal reform in the Accountable Care Act was a missed opportunity to significantly reduce costs Of note, the study estimated the most significant cost associated with medical malpractice was defensive medicine, which accounted for $45.6 billion of the total, most of which was spent on hospital services.
In an email conversation, I asked the study’s principal author, Michelle M. Mello, PhD, to clarify the study’s findings re the impact of med mal on defensive medicine – the theory that physicians change the way they practice to protect themselves against medical malpractice by prescribing more tests and studies.
Here’s Dr Mello’s response.
“There are two ways to measure defensive medicine. One is to ask physicians, using surveys, how often they order extra tests, procedures, and referrals primarily because of liability pressure. We didn’t use this method because it has two major shortcomings: (1) physicians may consciously or unconsciously overreport defensive practices because they want to help build the case for taking action to solve what they perceive as a problem with the liability environment; and (2) they may not be able to separate out different motivations they have for ordering services. In many cases, they may feel that ordering an extra test is a good idea both because it’s in the patient’s best interest and because it helps them reduce their liability risk.
The other method — the one we used — is to compare rates of health services that we think are indicative of defensive medicine in areas of high and low liability risk. If rates are higher in high-liability areas, and we can rule out other explanations for the differences, we can conclude that there is an association between liability and physician practices. The main challenge associated with this method is adequately controlling for other factors that could explain the differences. Researchers have extensively documented that physicians in different geographic areas have different practice styles, and it is believed that this is due to many factors, of which liability concern may be one.
We based our defensive medicine estimates for hospital services on previous analyses by Dan Kessler & Mark McClellan. Having reviewed the literature extensively as it has evolved over the past decade, our firm belief is that the Kessler & McClellan analyses provide the best available figures. Their statistical design enabled the researchers to control for other sources of variation in physician practices.
The main weakness of the Kessler & McClellan analysis, as we discuss in the paper, is that it was based on a narrow range of health services (cardiac care services) provided to a specific type of patient (Medicare beneficiaries). Is it appropriate to generalize from these data to all services provided to all patients? We have some concern about that, and consequently characterize the quality of the evidence supporting our defensive medicine estimate as low. Other kinds of health services may be less subject to physician discretion over treatment intensity than the cardiac services that Kessler & McClellan studied, so it’s possible that extrapolating to all services yields an estimate of defensive medicine costs that is too high. Nevertheless, we believe Kessler & McClellan’s analysis of the strongest one available.”
The paper provides additional background on the methodology used, and the challenges with that methodology. While it isn’t perfect, one has to compare it to the methods used by others who contend the tort system is a major driver of health care costs. Those ‘methods’ are rather less rigorous.
What does this mean for you?
One has to view the cost of medical malpractice in context – and the fact is there’s far too much lousy medicine, and far too little accountability.
If there’s one area of work comp pharmacy management that’s making payers crazy, it’s physician dispensing (followed closely by compounding).
The number of physicians and clinics dispensing drugs is growing; as one state seeks to reel in abusive practices, the purveyors move to the next. I first examined the business four years ago and found 18 companies in the business; a recent search turned up over fifty (I stopped counting there). This despite California’s belated move to rein in the practice that had, at one time, accounted for over half of the work comp drug costs in the ‘Golden State’ (an appelation likely invented by dispensing firms…)
The problem lies not in the actual practice, but in the opportunity for abuse – an opportunity that far too many ‘entrepreneurs’ have grabbed onto with both hands. (Details on this, and specifically the high cost of drugs in Florida, are provided below)
That’s not to say all clinics and practices dispensing drugs are unethical – some bill appropriately, charging perhaps slightly more than usual but nothing outrageous. That’s OK, as handing the patient their meds on the way out fo the office can help increase compliance and reduce patient hassles.
Unfortunately, those good actors are the exception rather than the rule. The Investigative Reporting staff here at Managed Care Matters recently uncovered some rather alarming information about one physician dispensing firm – Automated Healthcare Solutions.
Automated Healthcare Solutions, located in south Florida, has one of the slicker websites, full of platitudes about improving patient care, ensuring access, improving outcomes, reducing payers’ administrative workload…
Sounds great. Before you sign up, you may want to do a quick check on the folks behind AHCS.
Let’s start with Paul Zimmerman, M.D. ‘practicing orthopedic surgeon’ and CEO of AHCS.
Impressive bio – including claims that he was formerly Medical Director at “Liberty Mutual, The Home Depot, Pan American Airlines, Baxter Healthcare and Sears”. Knowledgeable sources have informed me that Zimmerman was never a ‘Medical Director’ at Liberty Mutual. And there’s no evidence he filled that role at the Home Depot either. I’ve asked AHCS to provide substantiation for Zimmerman’s claims…no response yet…
There’s much more to the Zimmerman bio, information that for some reason the good doctor hasn’t included on the AHCS site.
We’ll leave aside his rather modest rating on healthgrades, as the sample size is so small as to be unreliable.
There are two other issues that may provide insight into Dr Z’s policies and practices.
Allegedly, some years ago Zimmerman decided to go into practice in South Florida. He was taken under the wing of the late Dr Richard Dolsey, one of the best occ med physicians I’ve ever come across. Dr Dolsey ran an excellent practice (Physicians’ Health Centers in Miami), dealt ethically and honorably with patients and payers alike, and was widely respected in the physician community. In the course of their association, Zimmerman practiced at Dolsey’s clinic, at least until he allegedly decided to open his own office. According to sources knowledgeable about the events, Zimmerman was accused of attempting to interfere in Dolsey’s practice, specifically by taking patients, clients, and staff from Dolsey to help Dr Z’s new practice hit the ground running.
Instead, Dr Dolsey found out about Dr Z’s plans, and right about the time Zimmerman was about to execute his plan, confronted him. According to sources, the confrontation allegedly involved Zimmerman being escorted out of the office in restraints.
Dolsey subsequently sued Dr. Zimmerman and won his case.
More recently, Zimmerman’s decided to become heavily involved in Florida’s political scene, contributing heavily to GOP candidates and campaigns. Among the candidates Dr Z has supported is Charlie Crist, the ex-GOP and current independent candidate for Senate. In fact, the Zimmermans have maxed out their individual contributions to Crist – who happens to be the current governor.
The dollars didn’t stop there – at a measly $9600. Zimmerman’s company, AHCS, also plopped down a check for $100 grand on the desk of the Florida First Committee, Inc., a Florida PAC controlled by GOP veteran Bill McCollum.
Loyal readers may recall Crist vetoed a bill that would have tightly limited reimbursement for physician-dispensed drugs, a veto that came out of nowhere, surprising many who thought it was a done deal as it would have helped rein in costs in the Sunshine State, where drug costs are 38% higher than other states reviewed by WCRI.
Yep, Crist vetoed a bill that directly, materially, and significantly helped Zimmerman and AHCS. A bill that, had it become law, would have significantly hurt Zimmerman.
What’s the net?
What do you think?
Florida’s drug cost problem
Florida’s drug costs were recently analyzed by WCRI, which reported:
“…the average payment per claim for prescription drugs in Florida’s workers’ compensation system was $565–38 percent higher than the median of the study states.
The main reason for the higher prescription costs in Florida was that some physicians wrote prescriptions and dispensed the prescribed medications directly to their patients. [emphasis added] When physicians dispensed prescription drugs, they often were paid much more than pharmacies for the same prescription.
The WCRI study, Prescription Benchmarks for Florida, found that some Florida physicians wrote prescriptions more often for certain drugs that were especially profitable. [emphasis added] For example, Carisoprodol (Soma®, a muscle relaxant) was prescribed for 11 percent of the Florida injured workers with prescriptions, compared to 2 to 4 percent in most other study states.
Financial incentives may help explain more frequent prescription of the drug, as the study suggested. The price per pill paid to Florida physician dispensers for Carisoprodol was 4 times higher than if the same prescription was filled at pharmacies in the state. [emphasis added]
The study reported that the average number of prescriptions per claim in Florida was 17 percent higher than in the median state. [emphasis added] Similar results can be seen in the average number of pills per claim.”.
Brief. To the point. Here.
that sums up Hank Stern’s edition of Health Wonk Review – the best o’ the blog-o-sphere.
There’s been a lot going on in New York’s work comp system; heated discussions over adoption of disability and medical treatment guidelines, an uproar over assessments for self insured groups, and ongoing actions and attempted actions regarding the pharmacy fee schedule have kept our attention focused on the Empire State for lo, these many months.
Now comes news that New York may be the first state to dramatically increase payment for cognitive services. I heard this from WorkCompCentral’s Mike Whitely, who informed me that New York Work Comp Board Chair Bob Beloton is looking to raise reimbursement for physician evaluation and management codes by 30%.
Mike will have much more on this tomorrow (read WCC to see); I’ll focus my comments on the whys and wherefores.
First off, this is a good move, for many reasons. Fees haven’t been increased for 14 years in New York, making it high time for a raise.
Second, if there’s one service that is waaay under-valued in work comp, it is the time the treating physician spends with the injured worker, discussing the injury and treatment options, providing insights into medical care under work comp, educating the worker and their family about return to work, and discussing same with the employer and insurer. A 30% increase is money well spent.
Third, this will hopefully draw the attention of other states, and get them thinking about the significance of cognitive services.
All that said, I do have a major concern – as should you. About half of the care delivered to work comp claimants in NY is thru a discounted network. These networks may well try to keep their current discount arrangement, as a higher fee schedule will mean they deliver more ‘savings’ and thus earn higher fees (they get paid on a percentage of the ‘savings’, or the delta beween the fee schedule and contracted reimbursement amount).
It will be too bad if this (possible) increase doesn’t result in actual increases in reimbursement, and instead just makes networks more profitable.
What does this mean for you?
Good news.
Summer is ending next week, and favorable tax treatment will sunset not much later. With the end of vacation season fast approaching, investors will likely step up the pace, while owners looking to maximize their take-home are motivated to get deals done before 2011.
Another big motivator is the large amount of cash sitting idle as private equity firms have been waiting for things to settle down before risking their investors’ funds.
Here’s what’s happening.
ISG Holdings announced this am that they have finalized their purchase of Bunch and Associates. The deal took forever to close, but now that ISG owns the managed care vendor look for Bunch to dump their Ingenix relationship and move to Stratacare (part of ISG’s holdings).
Part of Bunch’s attraction for ISG was the potential to move their bill review from Ingenix to Stratacare, a move that will increase margins by a couple million bucks. This won’t be easy nor smooth, as Bunch has built a lot of logic in and around the PowerTrak bill review system, logic that has helped Bunch sell their services to self-insured employers. There are going to be some pointed conversations down in Lakeland (Florida, Bunch’s home) as the new owners look to maximize margins while customers, and customer advocates, look to proceed with caution.
Earlier this summer, Odyssey Investment Partners’ One Call Medical acquired transportation and translation company STOPS, broadening its workers comp portfolio. From a synergy perspective, this makes sense as injured workers often need transportation to their MRI appointment; as the largest MRI network in work comp, OCM should be able to leverage the relationship quickly.
Injured Workers Pharmacy has been looking for a buyer for some time, and the book is still out. IWP got hammered when NY changed their work comp pharmacy regs a couple years back, and has since moved into other states where they try to get claimant attorneys to get their clients to buy drugs thru IWP. Payers report IWP’s costs are much higher than the same, or essentially identical drugs purchased thru PBMs’ retail networks, making IWP persona non grata in the payer community.
PT firm Align Networks was rumored to be considering a sale this fall, but reportedly has decided to hold off for now.
There are a few more possible deals in the works, but we’ll have to wait and see what develops. I’d expect at least two more transactions in the space before the end of the year, perhaps more.
That’s the question North Dakota prosecutor Cynthia Feland should be asked by Judge Bruce Romanick if and when she appears in front of him to discuss Sandy Blunt’s request for a new trial.
The tortured history of Feland’s prosecution of former North Dakota state fund CEO Sandy Blunt is entering a new phase, as Feland will shortly have to respond to a State inquiry into her conduct during the trial, conduct which may well have included a failure to provide the defense with exculpatory evidence.
This isn’t a routine or common issue, despite what Feland says. In fact, it is quite rare for a prosecutor to be the subject of this type of inquiry, and once it gets to this stage, it is highly likely Feland will face disciplinary action by the State Supreme Court.
That’s one repercussion for Feland.
Another may be equally harsh. As anyone who’s watched any legal show on TV knows, the prosector must give all its evidence to the defense. Otherwise the defense has no idea what it is being charged with. This is absolutely basic to the US legal system, a core principal that is fundamental to our system of justice.
Blunt’s attorney has filed a request for a new trial or dismissal of Blunt’s conviction on charges brought against him by Feland. As I’ve discussed here repeatedly, the fact that these charges led to a court case in and of itself is incredible; Blunt’s felony conviction for authorizing gift cards, trinkets, and food for employee meetings and refusing to require a terminated worker to repay moving expense is beyond comprehension.
Nonetheless, that’s what happened. So here’s what’s new.
According to the article in the Grand Forks Herald, “Prosecutors did not turn over copies of a Bureau of Criminal Investigation agent’s interviews with four Workforce Safety and Insurance executives and a state auditor, Blunt attorney Mike Hoffman said in a court filing. Hoffman said he had requested copies of all law enforcement interviews in the case…
Prosecutors also said Blunt allowed a senior WSI executive, Dave Spencer, to keep almost $8,000 in moving expenses that he should have repaid, and to exhaust his sick leave when he was not ill, a benefit worth about $7,000.
Spencer’s employment agreement said he would have to repay some of his moving expenses if he resigned within two years; he left WSI in September 2006 after working there for about 19 months.
Hoffman said a Bureau of Criminal Investigation interview with the auditor, Jason Wahl, that was not disclosed to him[emphasis added] quoted the auditor as saying Spencer’s repayment of the money was a “nonissue” because Blunt forced Spencer out of his job. That would have undercut prosecutors’ arguments that the money was an illegal benefit to Spencer, Hoffman said. (according to North Dakota state policy, “In the event of a voluntary resignation, you will be responsible to repay the relocation reimbursement according to the following schedule: Before 1 Year 100%, Between 1 and 2 Years 50%, After 2 Years 0%.”; Spencer’s termination was not voluntary, thus Wahl’s memo proved there was no crime.)
Feland’s argument that the prosecution file was open to Hoffman does not absolve prosecutors of their obligation to turn over relevant material to the defense, Hoffman contended.
“An ‘open file’ policy does not abrogate or dilute the requirement that prosecutors disclose evidence” that the defense requests, Hoffman said. [emphasis added]
Not even in North Dakota.
By the way, I asked Feland repeatedly if she had provided this information to Hoffman or Blunt; she never answered the question.
Now, she’ll have to.
I can’t wait.