Oct
11

Is Florida finally going to fix its (repackaged) drug problem?

This morning’s WorkCompCentral arrived with the welcome news [sub req] that Florida legislators are (once again) going to take up the issue of repackaged drugs and their effect on workers comp.
It’s unbelievable incredible not surprising that the legislature still hasn’t fixed this problem. Perhaps now that NCCI has shown system costs were $62 million higher – a full 2.5% – due to repackaged drugs dispensed by physicians, politicians will do the right thing for Florida’s businesses.

Perhaps.
The latest report from NCCI indicated physician dispensers “charged more than pharmacies for all 15 of the top drugs in Florida…” The differential went from 45% on the low end to 680% for carisoprodol [aka Soma(r)], a drug that a good friend/Medical Director of a very large work comp insurer calls the “worst drug in workers comp”.
For those unfamiliar with the issue, here’s the briefest of summaries.
– Florida’s pharmacy fee schedule is set at 100% of AWP plus a $4.18 dispensing fee for both generics and brand drugs. But AWP is based on the drug’s NDC number, a code that can be created by the wholesaler/repackager. Thus, if a company wants to buy a million 800 mg ibuprofen tablets and repackage them into lots of 27, it can create it’s own NDC, and thus set its own AWP.
That’s how repackagers/physician dispensers make their millions.
– Florida tried to fix this a while ago, but then-Governor Charlie Crist vetoed a bill passed unanimously by both Houses that would have tied the repackaged drug’s price to that of the original drug’s ‘underlying’ NDC, thereby eliminating the huge markups.
Turns out Crist got a very large campaign donation from a very large physician dispensing/technology company – Automated Healthcare Solutions of Miramar Florida.
– then, under new Governor Rick Scott (!!) the legislature scheduled a vote on overturning Crist’s veto, a vote that – given the previous unanimous passage of the physician dispensing fix – seemed like a mere formality.
Alas, physician dispensing companies pulled out their wallets and donated $1 million to political spending committees controlled by incoming legislative leaders Sen. Mike Haridopolos, R-Merritt Island, and Rep. Dean Cannon, R-Winter Park. And, the scheduled vote…never happened.
– now, NCCI and WCRI have both published reports conclusively showing physician dispensed medications increase the cost of doing business in Florida.
Now you’re up to date. Disgusted; faith in politicians shattered; amazed by the hypocrisy of ostensibly pro-business elected officials, but hey, at least you’re current.
Here’s hoping Florida does the right thing – but don’t bet on it.


Oct
5

Hiring – RN case management pro wanted

I’ve never used MCM as a recruiting tool, but there’s a first time for everything.
An HSA consulting client is in the market for a managed care expert, specifically an RN with solid experience in workers comp medical case management/UR.
The client, an insurer in the midwest, is looking for an experienced, entrepreneurial and motivated nurse case management professional to manage the entire NCM function and support medical management in their workers comp claims operation. If you know someone who’s got deep experience in work comp medical management, is looking to make a difference, and wants to work with great people in a very solid organization, let them know there’s opportunity here. Or, if you’ve always wanted to help set up and run a nurse case management department, drive results and outcomes, and develop and manage relationships with NCM firms, you know this kid of opportunity doesn’t come along very often.
Shoot me an email – with resume – at infoAThealthstrategyassocDOTcom. I’ll pass it along to the client, and you’ll hear back from them.


Oct
5

What’s with all the M&A activity in work comp?

Up until this week, it looked like this fall M&A in the work comp services sector was going to be at an all-time high. Now, with Greece in default, the Euro in serious trouble, and markets looking for yet another bottom, things may slow down – or perhaps even stop.
While some would think foreign debt problems wouldn’t have much to do with whether a private equity firm or larger rival buys a company, there’s no question those kind of macro factors have a significant influence. Its not unusual for a merger or outright purchase to include substantial funding from debt as the buyers seek to leverage their equity investment. While this can make for even better returns for the buyer, it can also saddle the target company with a significant debt burden that can hurt cash flow, hinder investment, and drag down results.
Perhaps its folks trying to make a splash at the comp conference in Las Vegas in early November. It could be the expiration of the Bush tax cuts at the end of 2012 is driving owners to sell before Uncle Sam’s take increases. Competitive pressures are also a factor; some owners are likely seeing some of these deals (OneCall buying RayTel, STOPS, Express Dental; MSC’s purchase of Integrated Health, Sedgwick’s continual pursuit of complementary businesses) as the big getting bigger, and figure they better sell before they can no longer compete with rivals who far outweigh them.
More sophisticated sellers likely realize the uptick in claims frequency we saw last year produced a nice bump in claims (and therefore business volume), a bump that has, in all likelihood, disappeared as the structural decline in frequency resumes it’s 19 year long decline. Of course this only helps the frequency-driven businesses, and has little if any effect on sectors that are more affected by severity.
Then there’s the impact of regulatory changes, with Illinois leading the charge (for now); ongoing cost pressures on traditional work comp services; and let’s not forget the desire on the part of some investors to pull money off the table.
Remember private equity firms have a portfolio of investments – some are doing well, others so so, and still others have tanked. Their investors are expecting outsized returns, so occasionally a private equity company has to sell off one of its stars to balance a portfolio laden with underperformers.
Finally, it’s become apparent to me that the level of involvement with and depth of knowledge about the work comp services space has grown significantly within the investment community. Sure, there’s still a lot of noobs out there who don’t know a claim from a claim, but the folks who’ve spent some time in this business are getting pretty good at spotting trends and opportunities.
Expect to see a few more deals announced before, during, or just after, the Vegas comp conference.


Sep
29

Opioid abuse in work comp – the dialogue

Safety National’s Mark Walls has started a great discussion about the use – and abuse – of opioids in workers comp on his LinkedIn Group.
I’m struck by the quality and volume of responses to his post – in a couple hours, Mark generated a couple dozen comments including one from MyMatrixx’s Phil Walls RPh, one of the most thoughtful individuals I know in the PBM space, and another from a psychologist, David Dietz, with a different perspective. Dr Deitz notes that there’s much more to this than just the drugs, and his views are well worth thoughtful consideration.
I applaud both – and (almost) everyone else – for engaging in the discussion.


Sep
26

Work Comp Networks in Illinois

There are no work comp ‘Preferred Provider Programs’ approved by the State of Illinois – at least not as of today.
No provisional approvals, final approvals, conditional approvals, or any other approvals – if there were, they’d be announced here.
In fact, word is there are fewer than five (5) applications presently pending in Illinois, and most are entries from the currently-in place discounted PPOs from the usual cast of characters.
There’s no doubt the folks tasked with approving PPPs are working carefully and quickly to get as many PPPs approved as soon as possible – but they’re a bit hamstrung by the rapidity of events. Legislation passed just this summer, regs are still evolving, and this is a very, very hot political issue – better to get it right than to do it fast.
Much as we’d all like to have a small, expert workers comp network in place based on outcomes, strong credentialing, and appropriate reimbursement, these things take a bit more than three months. Usually quite a bit more.
What does this mean for you?
Patience, Grasshopper…


Sep
23

That UC Davis work comp study – PR v reality

The good folks at the University of California – Davis were kind enough to send me the entire study they are publishing re “…Predictors of Workers Compensation Costs”. This is the one that generated headlines claiming financial returns are the best single predictor of work comp premiums.
That’s not exactly what the study says. Sort of, but not exactly.
There’s a rather large disconnect between the report itself and the press release issued by UC Davis about the report. Moreover the press release itself is misleading, poorly written, and stuffed with quotes that reflect a lack of basic understanding about workers comp. Here’s one: “Increasing premiums had nothing to do with the number of injured workers, who often are incorrectly blamed for increasing premiums for employers.”
By whom? When and where? This kind of misguided PR flackery is sloppy at best, if not outright harmful. It can, and will, be used to add credibility to and strengthen the position of those with their own unique agendas.
Reading the press release and the report, you’d be hard pressed to know they were about the same underlying research report. The firm, declarative statements in the press release were NOT supported by the much more heavily qualified and less direct statements in the report.
For example, the report said this:

We had two major conclusions. First, the year 1992 marked a sharp contrast in trends and correlations between unemployment and incidence rates for occupational injuries and illnesses. Second, for the entire time period (1973-2007), insurance carriers’ premiums were strongly associated with returns on investments.

The press release read thusly:

Skyrocketing workers’ compensation claims payments are often blamed for rising premiums, but a UC Davis study has found that the number of claims has dropped during the past two decades… the study shows that higher premiums are instead associated with decreases in the Dow Jones Industrial Average and interest rates on U.S. Treasury bonds. “Insurance companies appear to have been setting premiums according to their returns on the stock and bond markets, not according to the number of claims they have” said J. Paul Leigh, UC Davis professor of public health sciences and senior author of the study.

Note the first sentence especially the phrases “workers’ compensation claims payments” and “number of claims”. There’s – at best – a marginal connection between the two. As NCCI, WCRI, CWCI, and pretty much every WC actuary has shown uncountable times, the COST of claims is separate and distinct from the NUMBER of claims.
Another problem with the press release – the report was about premiums, not costs. There’s a BIG difference between the two and conflating them was a serious error.
Leaving aside the big problems with the press release, there’s problems with the report too.
As a variable, the researchers selected regular ol’ medical inflation as reported by the Dept of Labor. As all of us in the work comp world, trend rates in work comp are NOT the same as trend rates in the rest of the medical payer world. Moreover, we look at medical inflation in two ways – on a calendar year and an accident year basis. The researchers said there wasn’t much of a correlation between premiums and medical inflation – well, given that there’s a tail in work comp long enough to circle the block, annual trend just isn’t viewed as – nor should it be – that significant. Which leads one to ask; so, why pick the medical inflation rate as a variable in a study specifically about work comp premium rates?
As I noted yesterday, the report uses OSHA reportable incidents instead of actual workers comp claims, then conflates the two – repeatedly. That’s just outrageously sloppy work. The authors do note that NCCI reports these data, but complains that they don’t cover the entire country. So, instead of using ACTUAL REAL workers comp claims, they use another dataset as a proxy and conflate the two – without any noticeable effort to correlate the two, identify differences, or account for them statistically. Why didn’t the researchers just focus the study on the NCCI states, where there were actual data? If they wanted national information, the researchers could have looked at OSHA data in those states, compared it to claim rates, and come up with some sort of statistical correlation.
That’s not all, but I have real work to do.
What does this mean to you?
Don’t read too much into press releases, especially if they are as inflammatory as this one was.
And be wary of research conducted by well-meaning folks who seem to think they’ve discovered something brand new that the rest of us knew existed for decades…


Sep
22

The UC Davis work comp study – What’s driving work comp premiums?

Yesterday’s news release from UC Davis claiming that workers comp premium increases are due to underlying shifts in financial markets will almost certainly generate a lot of conversation.
Here are quoted highlights with my comments in (parentheses).
– a UC Davis study has found that the number of claims has dropped during the past two decades…higher premiums are instead associated with decreases in the Dow Jones Industrial Average and interest rates on U.S. Treasury bonds. (I’m not sure UC Davis is the first to note that claims volumes have decreased over the last twenty years)
– premiums increased from 1992-2007, claims decreased 1 to 2 percent each year. Claims for serious illnesses and injuries varied, but decreased overall.
– for the entire 35-year timeframe of the study, rising premium rates were closely linked with the Dow Jones Industrial Average or Treasury bonds. As either the Dow or interest rates on Treasury bonds fell, premiums rose, and vice versa.
I’ve requested a complete copy of the study and will report back when I’ve a chance to read the entire document. For now, here are a couple observations.
1. The study used OSHA reported incidents as a proxy for WC claims. As all of us involved in workers comp are well aware, there is NOT a one:one correlation. I don’t know why the researchers didn’t find – and use – the number of actual workers comp claims. While it’s a pain in the posterior to get this information, it can be found. We’ve found it for a client – it’s out there, it just takes a lot of digging. By people who know where to dig. In any event, the study authors’ conflating of ‘claims’ with ‘incidents’ may well lead others to miss this key issue.
2. NCCI’s been reporting a decline in work comp frequency [opens pdf] of much more than 1-2% per year over the same period. From 1990 to 2009, frequency dropped by about 55%…
3. It’s hardly surprising that investment returns influence premiums. The old rule of thumb is a third of claim dollars are paid out more than 36 months after a claim is incurred, making the RoI of invested premiums critical. That said, I doubt work comp payers invest a significant portion of reserves – if any – in stocks listed on the Dow. That would be rather risky.
I’ve got a few other thoughts circling around, but in fairness they’ve been triggered by other media coverage of the report and not based on a reading of the report itself. At this point, rather than react to some of the quotes in UCDavis’ news release, quotes which may need context, I’ll defer further comment till I read the entire document.


Sep
19

Lousy proposals

I’ve spent much of the weekend reviewing responses to a client’s Request for Proposals for claims and managed care services. Here are a few takeaways.
1. Don’t tell how you’ve listened carefully and developed a customized approach designed specifically for the client and then talk about your California MPN if the client is only on the east coast. That’s just dumb.
2. Have someone who can actually proofread – proofread your final. Just because you ran it thru spellcheck doesn’t mean it is right. for example, ‘medial’ passes spellcheck, even when you are really trying to spell ‘medical’.
3. Either learn to write a decent document or hire someone who can.
4. Don’t talk about how you cap costs and guarantee a reduction in admin fees and then exclude case management, bill review, and other ‘managed care’ fees. The game’s up, people – payers know that’s where you make your money.
5. Don’t blather on endlessly about outcomes and quality and results if you don’t have data and compare that data to industry-wide metrics.
6. Can you really – with a straight face – say that 175 LT claims is a reasonable case load for an adjuster?
7. Address your cover letter to a person, not a title.
8. Don’t price bill review on a percent of reduction below billed charges. That’s a scam and everyone knows it.
9. Be clear about basis for pricing, include a definitions section, and be very precise about those definitions.
10. Don’t overwhelm with boilerplate marketing babble. Listen to the prospect, and show you’ve listened by writing a proposal that fits. Throwing everything up against the wall to see what sticks works only when cooking pasta.


Sep
14

Three things you should check out

First, David DePaolo’s post on the industry’s unfailing ability to believe it can keep doing the same things yet expect better results. David notes:
“A proposed rate filing in [Tennessee] would increase rates by 6.3% is causing regulators to take a look at the medical reimbursement schedule and proposing a reduction in the fee schedule. The same old arguments are at hand in both (or more?) sides of the debate – fees need to be cut because they are too expensive vs. access to care if physicians aren’t adequately compensated.
Stop the madness!! This is the same set of arguments that go nowhere each and every time the issue is raised. And each and every time the issue comes up, adjustments are made to a fee schedule, then everyone goes back to business as usual with cost shifting, procedure manipulation, bill review and utilization review shenanigans and in a few years we again have another crisis.” [emphasis added]
Isn’t that the truth.
Second, Jennifer Wolf-Horesjh (incoming Exec Dir of IAIABC) reminded me that IAIABC hosted an excellent webinar earlier this summer offering a comprehensive look into the opioids issue including recommendations for regulators seeking ways to address the problem. You can download or listen to a recording of the webinar; IAIABC’s making it available at no charge for members and non-members alike.
IAIABC is really focusing on this issue, and I applaud them for doing so.
Third, yesterday’s WorkCompCentral webinar on Prescription Drug Abuse in Workers Comp (your’s truly as presenter) is available for listening at your convenience. As the webinar was over-subscribed, those who werent’ able to ‘attend’ can watch and listen to the replay (no charge). details and a link coming…


Sep
13

NCCI released its 2011 pharmacy study yesterday, and there’s not much in the way of good news. Here are a few of the major take-aways from the research, which used 2009 data.
per-claim drug costs grew by 12% in 2009.
Pharmacy accounts for 19% of work comp medical expense, the highest percentage since NCCI started studying the issue.
OxyContin is now the number one drug. Yippee.
Utilization is the main cost driver, and physician dispensing closely follows. Physician dispensed drugs accounted for 28% of spend in 2009, up a full five points from the previous year.
Let’s take a quick look into a few of the other findings.
The older the claim, the more the drug spend. For claims more than 11 years old, drugs account for more than 40% of costs; for drugs 1 to 2 years old, drugs are a mere 3% of spend.
Drug costs for claims 4 to 9 years old are ” distinctly higher than in previous service years. Subsequent exhibits suggest that increases in physician dispensing might be contributing to this growth.” [emphasis added]
Physician dispensing accounts for fully half of all drug costs in Florida; about 44% in Georgia, 35% in Maryland, and about 32% in PA. Bad as that is, the big problem is that physician dispensing rose dramatically in almost every state. (Note that Hawaii’s decrease from 2008 – 2009 was a temporary situation, as all reports indicate physician dispensing has increased rapidly over the last two years.)
There’s a lot more to the study, and we’ll be digging deep into the research over the next couple days. For now, here’s what this means to you.
It is NOT ABOUT PRICE. Utilization is the main driver of work comp pharmacy costs.
Physician dispensing is the single biggest problem in work comp pharmacy. It’s beyond crisis stage.
With OxyContin the number one drug, we can expect claim durations to increase – people on high-power opioids are NOT going back to work.
And a big “well done” to NCCI’s Barry Lipton, Chris Laws, Linda Li, and their unnamed research associates for what is their best work on drugs to date.