Category: Research

Dec
3

Health care spending up 5.3% in 2014

Posted by Joe Paduda on Thursday, December 3rd, 2015 | Comments

Health care costs accounted for 17.5% of GDP last year after a 5.3% increase in spending. 

The overall spending increase, which followed 5 years of relatively low inflation, was attributed primarily to the addition of 8.7 million people to the rolls of the insured in 2014.

Health Affairs reported the biggest jump was in pharmacy costs which increased 12.2%, driven in part by Hepatitis C drugs including Sovaldi and Harvoni, both manufactured by Gilead. The big increase came despite a rise in the generic dispensing rate to 81.7 percent, up from 80.1 percent in 2013 and 77.3 percent the year before.

Total pharmacy costs were just under $300 billion with Hepatitis C drugs accounting for $11.3 billion in total spend.

Other goods and services also saw increases:

  • Hospital costs accounted for $972 billion, an increase of 4.1 percent. This was little changed from 2013’s 3.5% trend.
  • Physician and clinical services rose 4.6 percent to just over $600 billion.  The increase was due to a major jump in Medicaid expenditures.

Looking a bit deeper, Health Affairs broke down the cost increase to separate out the effects of price, demographic, and utilization:

Of the 4.5 percent increase in per capita health spending in 2014, changes in the age and sex mix of the population accounted for 0.6 percentage point, medical price inflation accounted for 1.8 percentage points, and the change in residual use and intensity accounted for the remaining 2.1 percentage points.

Interestingly, private households didn’t see much of an increase in costs; the report indicated a rise of less than 1.5%.

 

Nov
2

The IMR debate is focusing on the wrong metric

Posted by Joe Paduda on Monday, November 2nd, 2015 | Comments

Now that California’s courts have ruled the IMR process is Constitutional, we can hope things will settle down, docs will start learning what is acceptable and what isn’t, and needless friction will decrease.

Unfortunately that isn’t likely.  If history is any indicator, a very few docs will continue to flood the system with thousands of requests for IMR, most of them for drugs and procedures that fall far outside the state’s evidence-based clinical guidelines.

Let’s acknowledge that the system – like any – isn’t perfect.  Let’s also acknowledge that all the data, research, and credible study to date indicates it works quite well.  What’s lost in the data-driven debate is the real problem – we aren’t looking at the right metric.

As CWCI has documented, well over 90% of all work comp medical procedures, tests, drugs, and treatment are approved.  And, when appeals do get to the last stage; the Independent Medical Review:

Data on the IMR outcomes show that 91 percent of all IMR decisions upheld or agreed with the physician-level utilization review opinion, while conversely, 9 percent of medical service requests submitted for IMR after being modified or denied by a UR physician were approved by the independent medical reviewer.

I’d suggest the CA UR and IMR process is approving TOO MUCH care.

Does anyone think that 94%+ of all medical procedures requested or delivered to California’s work comp patients are medically necessary, appropriate, and the best possible care?

Didn’t think so.

There’s no question too much care can be quite harmful.  The rampant overuse of opioids in workers’ comp is but one example of far too much care causing grievous harm.  Add in far too many spinal surgeries with lots of implants, and one can see that these “approved” services are far from optimal care.

What does this mean for you?

Why aren’t we focused on making the UR process tighter with more stringent controls and requirements before potentially dangerous and debilitating treatment is authorized?

Oct
30

Friday catch up

Posted by Joe Paduda on Friday, October 30th, 2015 | Comments

Heading home from California, where I had the honor of spending most of a day with the good folks at the California Workers’ Compensation Institute.  Really fun (yes, fun!) to discuss research topics, methodologies, limitations, and uses with the real experts. CWCI has a robust research agenda heading into the winter, and we’ll see much of it published before their annual meeting.

Which is a “don’t miss”.

If you haven’t seen their latest work on drug testing in work comp, it is well worth a read.  This is one of those complicated topics where a brief scan of the report isn’t enough to do it justice.

There’s been a lot of great research from NCCI and WCRI published recently as well.  I’ll be able to work thru the backlog while enjoying a cross-country flight, and will report back on Monday.

In the interim, there’s been a bit of buzz about a big acquisition of late.  I’d suggest that folks take a deep breath and relax.  These things take a lot of time, there are lots of regulatory hurdles to navigate, and things are especially sensitive when a publicly-traded company is involved.  If you are thinking something will happen before NWCDC in Vegas, you should re-think.

Finally, the just-announced Stevens decision affirmed the Constitutionality of California’s IMR process.  This is BIG NEWS, as it removes a lot of uncertainty about utilization review and related matters. Read Stephanie Goldberg’s piece for the details.

Oct
7

Workers’ comp pharmacy costs – Survey says…

Posted by Joe Paduda on Wednesday, October 7th, 2015 | Comments

CompPharma, a consortium of workers’ comp pharmacy benefit managers, released the 12th Annual Survey of Prescription Drug Management in Workers’ Comp yesterday.  The Survey is an in-depth look at the issue based on telephonic interviews with 21 TPAs, insurers, state funds, and self-insured employers.

This year, we (I’m the author of the study) found that drug costs increased across all respondents.  Comparing total 2013 and 2014 drug spend across all respondents, costs climbed 6.4%.

However, that increase was driven by a minority of respondents as only 7 of the 21 saw costs go up.

Looking at inflation another way, we also calculated the average increase for each respondent; trend was essentially flat.

We offer these different metrics to provide readers with as much data as possible so they can draw their own conclusions.  One could argue that you have to look at cost changes across an entire industry to really understand what’s happening.  Another perspective focuses on individual payers. As the payer’s policyholder base doesn’t change that much from year to year, a payer-specific view is more accurate.

The big question is what is driving drug spend increases.  In that, respondents’ views were pretty consistent – physician dispensing, opioids, and compounds.  I’d note that the industry has had some pretty good success addressing opioids; PBMs that report on this have all been able to decrease opioid spend over the past couple of years.

Another cost driver, mentioned by a couple respondents, was likely a major contributor: price inflation for generic medications.  Fortunately, that has leveled off somewhat of late, although entrepreneurs will continue to look for opportunities to make their fortunes by buying up manufacturers (of little-used drugs) and dramatically increasing prices.

A couple points that bear making.

First, work comp pharmacy is about as different from group health/medicaid/medicare as chalk and cheese.  There are:

  • no deductibles, copays, coinsurance, or other cost sharing for patients
  • wide-open choice of drugs except in TX OH WA and OK
  • most spend is for pain; 24% of dollars go for opioids while about 84% of spend is for pain

Second, the PBM industry has done a remarkable job of bringing down the rate of inflation over the last dozen years.  Yes, there have been a couple spikes over that time, but ten out of twelve years we have seen a ‘decrease in the rate of increase.”

 

Sep
29

Causation and Correlation and the fallacy thereof

Posted by Joe Paduda on Tuesday, September 29th, 2015 | Comments

There’s a big difference between “causation” and “correlation”.  Just because A is around when B happens does not mean A causes B.  It could be that A’s friend C is actually the instigator, and A and C happen to hang out together a lot.  Or let’s say B is graffiti at the subway. A can only get out of school on Saturdays which is the only day B occurs because that’s when the graffiti school has their practical exercises.

Or, to be a bit more complex, when Justin Bieber was born, cholesterol scores began to decrease.  Until, that is, Facebook was invented, which reversed the decrease, thereby proving the Beebs is not as powerful as Facebook!

justinbeiber

Did you know that the more mozzarella consumed in the US, the more civil engineering degrees that are awarded?

Did you know that the age of Miss America strongly correlates with the number of murders by steam, hot objects, or hot vapours?

And the more the US spends on science research, the higher the number of suicides by suffocation strangulation, or hanging… (damn science!)

For those consumed by marriage in Kentucky, know that the marriage rate is closely tied to the frequency of death by falling out of a fishing boat.  Perhaps a fishing honeymoon involving moonshine is a time-honored tradition in Kentucky…

Now you know…

But seriously folks, even esteemed medical journals sometimes screw this up – HealthNewsReview highlighted one such faux pas last week in the British Medical Journal of all places.

According to HNR, a BMJ piece about SSRIs and crime stated:

‘Use of selective serotonin reuptake inhibitors (SSRIs) increases the rate of violent crime among young adults.’

The piece SHOULD have said “there is a correlation between SSRIs and an increased risk of violent crime among young adults.”

See the difference?  A statistical correlation does not mean one causes the other. In fact, it could be that violent youths are more likely to be prescribed SSRIs, or the crimes studied were committed in an area where psychiatrists prescribe SSRIs a lot more often than in other areas, or any one of dozens of other reasons.

I bring this to your attention, dear reader, because there’s far too much sloppy reporting out there that confuses correlation with causation, often by folks that should know better.  

What does this mean for you?

Think critically.  Always.  

Sep
4

Work comp medical spend and other fun facts

Posted by Joe Paduda on Friday, September 4th, 2015 | Comments

In my ongoing effort to serve the public good, here are current facts and figures related to how many dollars are spent on medical care in worker’s comp. 

Total medical dollars

In 2013 workers comp medical spend totaled $31.5 billion.  Source – NASI’s Workers’ Compensation 2013 Report.  NASI is the definitive source for this data; their primary sources are NCCI for the 38 states where NCCI is the rating agency and state rating agencies/bureaus for the other 13.

Worker’s comp medical trend rate

NCCI’s Annual State of the Line presentation at the firm’s Annual Issues Symposium provides the earliest – and most complete – insight into medical inflation.  For 2014, initial indication was medical severity for lost time claims increased 4 percent.

A couple of caveats – this is for lost time claims only; while LT claims account for the vast majority of medical spend, medical only claims account for perhaps 15% of spend.  In addition, NCCI’s data does not include self-insureds; about a quarter of comp benefits are self-insured.

Pharmacy spend

Work comp pharmacy spend accounts for somewhere around $5.5 – $6 billion.

Sources

  • Internal HSA data from research projects (my consulting work)
  • NCCI – by their estimate drugs accounted for 18% of all medical expenses in 2011; note that this is based on total incurred cost, or for the layperson, their estimate of what the total including already-paid and future drug costs. Therefore this isn’t actual annual “spend”. And, the data comes from 2011 reports.  There’s a lot more to this, but suffice it to say the $ range above is solid.
  • note – some claimants are submitting their work comp scripts to their group health plans.  While this won’t affect “spend”, it does impact the addressable market.

There are a lot of other sub-categories out there – and just as much confusion about what services, codes, provider types, or locations of service belong in what buckets.

If you are attempting to categorize spend, make very sure you understand your sources’ definitions.  E.g., script count; how do you define a “script”?

  • Is it the prescriber’s prescription written out for a patient?  If so, understand that most “scripts” include 2+ drugs.
  • Is it each individual medication prescribed?  If so, understand that some “scripts” are for 3 days’ supply, others for 90.
  • Is it for a certain number of days’ supply?

Different stakeholders use different definitions – and not just for pharma.  How is “surgery” captured, and what is included?  CPT codes? Facility fees?  Associated office visits? Bills submitted by providers with a surgical specialty?

I could go on, but hopefully you get the (cloudy) picture by now.  If not, your bad.

What does this mean for you?

Work comp data is dirty, inconsistently categorized, and there are no single sources for all categories/spend types.

If you want to really understand the space, get granular, precisely understand definitions, and do NOT make any assumptions that other non-primary sources have got it right.  

Aug
26

Steroid injections – they kinda sort work some of the time…

Posted by Joe Paduda on Wednesday, August 26th, 2015 | Comments

Thanks to Steve Feinberg, M.D. for forwarding a study on epidural steroid injections.

Here’s the brief findings:

Epidural corticosteroid injections for radiculopathy [pain radiating from the spine] were associated with immediate reductions in pain and function. However, benefits were small and not sustained, and there was no effect on long-term surgery risk. Limited evidence suggested no effectiveness for spinal stenosis.

In a follow up, Dr Feinberg provided this:

I have a 68 year old physician colleague who is highly functional both at work and recreationally. He has rather severe cervical and lumbar degenerative disease and stenosis and a very damaged left knee. He has undergone a number of injections (more than would be allowed via EBM) and takes Vicodin 10/325 3 times a day and uses some oxycodone for “breakthrough” pain. He lives on 5 acres and takes care of 10 horses and the property. He told me that working on his property makes him hurt more but that he is not going to stop being active just because of the pain/discomfort. He has been on the same opioid dose for years and has no obvious negative side-effects. He told me that without his medications, he would have trouble practicing as a physician and he certainly would not be active on his property.

Dr Feinberg closed with:

“I ask myself everyday if so little works, what are we left with to treat?”

A colleague of the good doctor provided this as well: “Could it be that Osler’s words from over a century ago continue to direct our best efforts? “The job of the physician is to entertain the patient while nature takes its course?”

I bring this to your attention as a reminder to all that medicine can be as much art as science, that we often don’t know what works for whom why and when and how.

However, make no mistake that treatment can and should be guided by evidence-based clinical guidelines. There should be a way to navigate the care management and authorization process to allow Dr Feinberg’s colleague access to the treatment that works for him, just as there should be a high standard for approval of “non-standard” care that puts patients at risk.

I’d close with this note – there is far too much use of procedures similar to ESIs, and far too little challenging of that use.

What does this mean for you?

Promote EBM, and ensure your authorization processes work well.

 

Jul
30

So what’s up with health care costs?

Posted by Joe Paduda on Thursday, July 30th, 2015 | Comments

Actuaries are projecting health care costs will increase 5.8% annually over the next 9 years. Others think that increases will be significantly smaller.

While the 5.8% is a bit higher than we’ve seen of late, it is a heckuva lot lower than the average for the last three decades.

Currently health care is responsible for 17.4% of US GDP; if the inflation rate prediction holds true and other economic sectors also grow as projected, health care will account for one out of every five dollars in ten years (19.6% to be precise).

We do know that the prediction will prove to be somewhat wrong, and economic growth for the next quarter is hard enough to predict, making a ten-year projection the proverbial dartboard in a dark room.  So, what’s with the discrepancy between predictions?

The actuaries responsible for the 5.8% figure believe the soft economy over the last few years has been the primary driver of low health care cost inflation.  Their thinking is that now the the economy is back to steady and significant growth, demand and prices will both heat up.

The counter-argument attributes the recent happy days of low medical cost inflation to structural changes in the health care delivery system. Their view is these changes, while overwhelmed somewhat by the big increase in the insured population due to PPACA, will help keep cost growth low as they become increasingly commonplace.

At this point, we just don’t know; there is anecdotal evidence that medical homes work and don’t; that ACOs are a success and a failure; that behavioral changes are working and are non-existent. That is far from surprising; we are still pretty early into this process, a process which is massively changing almost one-fifth of our nation’s economy.

What does this mean for you?

The key message is costs will continue to increase, with health insurance cost increases somewhat mitigated by higher deductibles and copays.

What’s also very clear is the health plans that are able to deliver lower costs and sufficient outcomes will do very well.

 

 

Jul
15

Drug testing (partially) explained

Posted by Joe Paduda on Wednesday, July 15th, 2015 | Comments

Once more we will delve into the minutiae of an issue…this time into testing patients who are prescribed opioids to ascertain if they are taking the prescribed medications, and if there is evidence they are consuming other licit and/or illicit drugs.

(full disclosure – Millennium Health, the largest toxicology testing company, is a consulting client)

All guidelines suggest/encourage/require testing of patients prescribed opioids.  

There are two types of urine drug tests – qualitative, where a cup test simply indicates if a drug is or is not present, and quantitative, which is much more accurate and must be done in a lab.

I’m surprised at the continued use of qualitative tests as they are notoriously unreliable; research indicates the cup test failed to show benzodiazepines were present for 28% of specimens, and cocaine for fully half of specimens evaluated – and false negatives and positives for other drugs are much higher than one would expect.  These “false negatives” are obviously misleading; the usefulness of cup tests is further compromised by how easy they are to fool. (there are about a gazillion web pages that provide info on passing a cup test…)

Say you are prescribed Oxycontin, but haven’t been taking the pills.  You’re scheduled for an office visit, have sold your pills, and don’t want to get caught.  You can rent pills to pass a pill count, and if you’re asked to pee in a cup, you can shave one of the pills into the cup, thereby adding the chemicals that will show you are compliant.
Voila!  you’re clean!

Except, if your sample gets sent to a lab for quantitative testing.  It is much harder to fool good lab testing because the testing equipment:

  • uses much lower cutoff levels for drugs, thereby finding more positives than cups do;
  • tests for metabolites – the chemicals created by your body after it processes the drugs: metabolites show you’ve actually taken the drug
  • checks for certain chemical markers that can indicate if the urine is fake or from another person (or, in some cases, another animal)

There’s much more to this; warning, if you start looking around on the web, you’ll find some incredible stories and myths and tales about folks allegedly passing tests; great for entertainment but very easy to become mesmerized for hours.

I recently reviewed data from a very large sample, specifically looking for data about cup results vs lab (quantitative) results.  The analysis was rather disturbing…Cup tests missed:

  • 45% of opiates (cup reported no opiates, lab reported opiates)
  • 44% of benzodiazepines
  • 28% of marijuana

Cup tests also indicate drugs are present when the lab tests show they are not, false positives occurred in:

  • 27% of reported opiates
  • 69% of antidepressants
  • 100% of PCP

What does this mean for you?

Be very careful about basing decisions on cup tests – even if they show there aren’t any anomalies or “unexpected” results.

Jun
19

My favorite day of the year

Posted by Joe Paduda on Friday, June 19th, 2015 | Comments

This year Father’s Day and the Summer Solstice fall on the same day – making for a very long day here in upstate NY with lots of daylight so I can loll around while being waited on (well, maybe not that last part).

While I was busy inundating your inbox with posts on the profitability – or lack thereof – of workers’ comp, a bunch of other stuff happened.

Another shot in the subrogation/third party liability battle was fired by Kentucky’s Medicaid program.  According to WorkCompCentral’s Ben Miller, hundreds of letters have been sent to work comp insurers in an attempt to ascertain if specific individuals’ medical care is due to a work comp injury.  The rationale is clear; Medicaid doesn’t want to pay for medical care it doesn’t have to.  As a taxpayer I completely support this.  Where it could get really sticky involves settled claims; if the work comp insurer/employer has settled the claim, my assumption (always dangerous) is the settlement requires the claimant to use those funds to pay for injury-related medical care.

What if the claimant doesn’t have any of the settlement dollars left?  If the claimant doesn’t pay, is the work comp insurer/employer liable? Who’s going to be stuck with the bill; the claimant?  the provider? Medicaid? another insurer?

Oh boy.

A terrific article in Harvard Business Review on what private equity investors do when they buy companies notes three distinct types of “engineering”; financial, governance, and operational.  Lots of insight, data, and examples make this a must read for anyone considering a transaction, or trying to understand how PE firms work.

Activity in the oil patch is slowing down, but claims counts are not going up.  Reuters quotes a Travelers insurance exec who’s a bit surprised about this; I have a call into Travelers to see if we can get more insight into the issue, and will share whatever I learn.

The new, updated Washington Guidelines for Prescribing Opioids for Pain are out; a product of the Agency Medical Directors (AMD), the new guidelines address opioid usage for many different conditions, cover special population issues, and update and expand a variety of treatment- and risk-assessment-related topics.  With five years’ experience under its belt, the AMD have learned a lot, lessons that other jurisdictions would be well-served to consider.

Finally, for many families in Charleston – and elsewhere – this Father’s Day is anything but joyful.  If I may be so bold, I’d suggest we strive to be part of the solution.