Allstate Insurance filed suit against physician dispensing “technology” firms Infinite Strategic Innovations Inc (ISI) and Doctors Medical LLC earlier this week.  This is the second in what may be an-ongoing series of legal actions by the giant insurer, and comes on the heels of a settlement in their earlier suit against dispensing “technology company” Automated Healthcare Solutions.  

While the AHCS suit has been dismissed, I think we can assume Allstate made out quite well in the “dismissal”; Allstate doesn’t move unless they are very confident, and they come with overwhelming force.  Even the most arrogant, litigious, and downright nasty opponents are going to quail in the face of an Allstate lawsuit. While no one’s talking,   it is logical that Allstate would not have allowed the suit to be withdrawn unless they were pretty darn happy with the resolution.

My guess is Doctors Medical’s owner, Tom Mollick, is having a very bad week. And things are not going to get any better for Mollick et al.

From reading the complaint, Allstate is claiming ISI and DM received payments totaling $93,265 for PIP claims in Michigan, and has billed Allstate another $443,751 for other claims.  Allstate wants (most of) their money back, doesn’t want to have to pay most of the pending claims, and wants ISI and DM to agree to stop billing the insurer.

The key parts of the suit include:

• request for declaration judgment
• a statement that ISI and DM have no standing to bill as they are not medical providers
• request for restitution for claims adjusting, administrative, and legal costs
• assertion that ISI and DM operated “under the umbrella” of Rx Development Associates, Inc.  

There’s a lot more to this, but the net is this.  This is the second in what may well be a series of suits against physician dispensing companies; my guess is Allstate won big in their initial suit against AHCS, and is pursuing Mollick now, and will go after other dispensing companies as well.

As the AHCS suit was withdrawn, we don’t know what the resolution was – and never will.  And more’s the pity, because Allstate may well have solved its problem, but did nothing to address the problem for the rest of the industry.  That’s understandable as it isn’t their lawyers’ job to fix other insurers’ problems.

Nonetheless, it would be…helpful if the result of these legal actions was public knowledge – it would give pause to the other dispensers and their cronies, alert other insurers to the issue, and, over the long term, reduce Michigan auto insurance costs.

What does this mean for you?

Check your payment records, figure out how much you’re paying dispensers and their enablers, and do something about it.

 

For every complex problem there is an answer that is clear, simple, and wrong.

Thank you, HL Mencken, for describing the problem inherent in picking a workers’ comp PBM based on how much they charge for drugs.  

It is really easy to compare bids from PBMs based solely on how much they’ll charge for brands and generics.

It is also wrong.

While workers comp insurers have (mostly) figured out that the price of the pill is a lousy way to decide on a PBM, every now and then I get a call from a payer who’s just been offered a GREAT price from a PBM, and is either a) gleeful that they have been so smart and such a cunning negotiator; or b) panicked because their boss wants to change PBMs and the vendor manager knows it’s going to blow up.

Okay, let’s walk thru this.

The price of the pill is important, but it is only ONE part of the equation. Which is as follows:

Price per pill x number of pills per script x percentage of scripts processed in the PBM’s network.

Price per pill is determined by the discount below AWP, brand:generic mix, and, most importantly, by the type of pills dispensed.  If a PBM does a crappy job managing the clinical aspects of the pharmacy program, you’re going to pay for far too many pills, and for the wrong kind of pills. It’s safe to say you’ll be paying for lots of opioids, Soma, and other highly-questionable-if-not-downright-harmful-drugs.

But hey, at least you’re getting them for cheap!

Lets say you don’t care about the kind and volume of pills, you just want the deep discount.  Even then, you will likely find the cheap PBM delivers crappy results.  Here’s why.

PBMs that pitch really low per-pill pricing are likely using a group health-contracted pharmacy network, which leads to problems with paper bills and administrative hassles for adjusters.  Regardless, the network penetration for the cheapo PBMs tends to be pretty low compared to the WC PBMs.  There’s a bunch of reasons for that which I won’t get in to here.

Suffice it to say that while you may get a great price on 40% of your scripts, you’ll be paying flat-out retail on the other 60%.

In contrast, WC PBMs typically deliver penetration in the 80+% range.

So, even if their discount isn’t nearly as low as the cheapo ones, the effective price will likely be lower – because you get that discount on twice as many scripts.  

What does this mean for you?

Look at the price, sure, but look at penetration.  And, of course, clinical programs.

Because the greatest penetration in the world is a big problem if its all opioids and Soma.

A few states – very few – are getting some measure of control over the overuse of opioids in workers’ comp.  I’ve been speaking to folks in these states, and will report on those conversations, what is working, what isn’t, and what we can learn.

We’ll start with Texas, where Kim Haugaard of Texas Mutual has been working closely with TM’s Medical Director Nick Tsourmas MD – and pretty much everyone else at TM and in the provider community on this issue for years.  Notably, Texas has the advantage of a strong regulatory environment with clinical guidelines and strong UR rules.  While this combination makes it somewhat easier to address opioid overuse, the regs are only good if they are fully embraced.  That, Texas Mutual has done.

Here’s part of our conversation.

MCM – What was a key factor motivating TM to address opioids and drugs?

Kim – We are meeting with our actuaries constantly, monitoring the trend lines, average paid per claim and other data points.  We separate out claims with and without opioids.  [From those analyses, we learned] The longer claims were open, the higher the chance there were drugs involved, and drugs were the driving cost factor.  Once you address the drugs, you reduce length of disability.

MCM – What are the results of your efforts to date?

Kim – We have had a lot of success addressing opioids and all drug overuse, probably more than any other company. Our drug costs have seen a steep drop since Q1 2010.

Overall opioid usage is down by over 40%. I can tell you that of the 1,249 claims no longer receiving “N Drugs”, 46% of those injured workers are receiving no drugs whatsoever. The other ones have moved away from the N-status drugs to Y-status drugs. 

You may remember at AASCIF, Dr. Tsourmas presented the findings on a program that I implemented several years ago. For the top 400 most costly Rx claims, the average Rx cost per claim per year was $14,700. After our program – outreach for doctor-to-doctor, average cost per claim was $3300, average savings of $11,400 per claim.

MCM – What’s the key to your success?

Kim – You have to attack the drug issue from all angles, this is a team effort, involving prescribing doctors, and various carrier stakeholders, including, front-line staff, actuary, medical operations staff, medical director, legal, and the PBM.

MCM – You noted this is a team effort – who else is on your “team”?

Kim – We are working very closely with the Texas Medical Society and Pain Society, we’ve spoken at their conferences and met with physicians and physician leaders individually.  Some physicians we had issues with are now collaborating closely to address the opioid issue.

On drug testing, we are working with Millennium Labs on developing a “best practices” program, setting up testing protocols based on patient risk scores.

MCM – How do you focus your efforts?

Kim – In everything we do, we focus on outliers – reward the high performers and analyze and address the low performers.

What does this mean for you?

Yes, you can dramatically impact opioid overuse.  

While strong regulations are a big help, a) you have to use them effectively, and b) much of what Texas Mutual has done can be done anywhere – perhaps with a bit less success, but success nonetheless.

Physician dispensing – it’s not just for Americans any more!

From the Harvard Business Review comes this item; Chinese docs prescribe waaaay too many antibiotics – because that’s how they make money.

Antibiotics are often prescribed unnecessarily for colds in China, in part because hospitals sell medications directly to patients and doctors’ bonuses often depend on drug revenue, says a team led by Janet Currie of Princeton. In a past study by other researchers, two-thirds of patients visiting clinics with mild cold or flu symptoms received inappropriate prescriptions for antibiotics, and many were advised to take powerful “second-line” antibiotics that are supposed to be reserved for serious illnesses. These prescriptions impose substantial costs on patients, raise the risk of side effects, and foster growth of drug-resistant “superbugs,”

Here’s hoping WC docs don’t “reverse engineer” Chinese business practices.

Hiring

The Hartford is looking for a medical director; evidently Rob Bonner MD will be retiring.  This is one of those great opportunities for business-oriented work comp docs; the Hartford’s Medical Director has real authority and responsibility.

Journalism

Much as I respect the folks at R&I, their latest “editor’s choice” had me scratching my head about a piece from the Washington Examiner – It’s a climate-change denier piece asserting that we may be in for a century of cooling due to…wait for it…sunspots.

C’mon.  There have been 2528 peer-reviewed articles about climate change over the last year.  A grand total of one – yes, that’s one – rejected man-made global warming.  And that lone article was in the Herald of the Russian Academy of Sciences.

Principled and soundly-researched discussion is critically important – but only when it is reality-based.

Exchange enrollment

Exchange enrollment data is pretty mixed; numbers are way up in California and New York but most folks who are eligible for Medicaid or for subsidies via the Exchanges don’t know they are eligible.  Not surprisingly, the Latino enrollment data in California has been disappointing – to say the least.

On the federal side, enrollment seems to be much below expectations, even after the end-of-the-year push.  Whether things will pick up a lot before the March drop-dead date remains to be seen…

One factor affecting enrollment in many states may be that fourteen have enacted so-called “navigator suppression” laws; legislation that hinders/prevents/makes it difficult for the people who are supposed to help the uninsured enroll do their job. (thanks to Julie for the tip).

Impairment ratings

In one of the more esoteric  – but nonetheless significant conversations of the last week, I learned that many of the impairment ratings done in Texas are wrong – for a multitude of reasons.  Evidently those done by chiros are often (like 80% often) much higher than they should be, and medical doctors aren’t a whole lot better.  TX payers that aren’t reviewing ratings to make sure they are right may be paying out a whole lot more than they should – especially if those ratings are above 15%, the “magic number” where big payouts kick in.

Enjoy the frosty weekend – high this week in upstate NY has been 8 degrees.  Get out and enjoy!

 

I’m only aware of three major work comp insurers (Travelers, BWC-Ohio, Washington L&I) that have pharmacists on staff; the North Dakota State Fund does as well.

With pharmacy costs accounting for somewhere around 15% of total medical spend, that seems like a “miss”.  Yes, pharmacy costs have been flat in recent years, but the impact of drugs on work comp claim duration and the medical and indemnity expense associated with long-term drug use is quite significant.

Many payers have medical directors, nurses, and other clinicians on staff to help address medical issues; in some instances ALL medical issues are the purview of clinicians. Yet these payers don’t have pharmacists on staff, relying instead on medical folks.  Sure, they have knowledge of pharmacy, but nowhere near the depth and breadth of expertise resident in even the greenest pharmacist.

As physician dispensing of medications increases, payers begin (yes, most are just beginning) to address their long-term opioid users, off-label prescribing continues to grow, new medications come on the market, and compounding spreads, payers will find themselves at a disadvantage if they don’t have inhouse expertise.

Sure, PBMs have pharmacists on staff, and most are very, very experienced, understand pain management, and know work comp.  They have the added benefit of being “free”; they don’t increase overhead expenses.  But they work for the PBM, aren’t available on an ongoing basis to address the issues listed above, and if the insurer switches PBMs, that experience and corporate history disappears.

Twenty years ago rare was the insurer with any real medical expertise on staff. Claim adjusters were quite capable of handling medical issues, thank you.

It won’t  – at least it shouldn’t – take that long for insurers to see the wisdom of hiring pharmacists.

 

 

The deal is done, and there are certainly lots of smiles in lots of places. The merger of two of the largest workers’ comp PBMs, finalized today, has implications far beyond the two companies, their employees and customers.  But we’ll get to that later.

For now, congratulations to Eileen Auen, HIG, Tommy Young and Emry Sisson, and the folks at Stone River and PMSI.

Eileen, Jay Krueger, and their team turned around a PMSI that was perilously close to irrelevancy.  A remarkable accomplishment, and one that generated what could be a record RoI for investor HIG.  While terms weren’t disclosed, there’s no doubt HIG’s investors more than pentupled (if that’s a word) their original investment.

Young and Sisson worked diligently to move past the third party biller image/business. Their leadership of Progressive, and the excellent work done by their clinical management and operational staff has, according to well-informed sources, led to satisfaction levels at key customers that exceeded those delivered under the legendary (yep, you’re old enough now that you’re a legend) Dave Bianconi.

Sources close to PMSI indicate a number of employees will benefit from the deal, as HIG spread the equity around.  That’s as it should be; without their efforts, it never would have happened.

The work comp PBM industry has matured greatly over the last few years, and this transaction is evidence of how far things have come.  I’d be remiss if I didn’t note that other PBMs have also made remarkable strides in a relatively short period, and continue to get better.  This is one of those industries where each competitor is constantly raising their game, pushing the others to do the same, with customers benefiting greatly.

If I sound a bit exuberant, it’s because I’m really pleased to see good people do well.

Don’t spend it all in one place.