Feb

How many dollars are wasted on physical therapy?

Posted by Joe Paduda on Friday, February 12th, 2010 | Comments

Probably a lot. Perhaps most. And certainly a big chunk of the bucks your insurer/TPA is paying.
Unlike surgery, imaging, drugs, and other types of medical treatment, PT has long been a bit of a black art.
The clinical guidelines for PT that do exist (with one exception I’ll get to in a minute) usually say something like ‘two visits a week for four weeks’, without describing what is to be done during those visits, who’s supposed to do what gets done, and equally important, what shouldn’t be done.
That’s the primary reason physical medicine (PT and chiro) accounts for about one out of every five dollars spent on medical care in work comp, and would account for big bucks in group if it weren’t for tightly written benefit limits (x visits at a 50% copay).
Before the PTs out there start flaming me, know that I’m a believer in the ability of appropriate PT and have seen lots of data that support the use of PT in helping injured folks return to functionality. But I’ve also audited many work comp claims where the claimant had been to PT hundreds of times. I recall one where the claimant had over five hundred (500) visits over a three year period, with each PT note looking identical to the previous one. The payer couldn’t cut off the treatment because the treating physician had ordered it, and the clinical guidelines weren’t robust enough to force the issue in court.
Last month the NYTimes had an excellent article by Gina Kolata on just this issue. Here’s an excerpt:
“My doctor at the Hospital for Special Surgery in New York, Joseph Feinberg, seems to share my opinion [that much of PT is waste]. “Very often, I think the hot packs, cold packs, ultrasound and electrostimulation are unnecessary,” he said, adding, “For sure, in many cases these modalities are a waste of time.”
So has physical therapy been tested for garden-variety sports injuries like tendinosis? Or is it just accepted without much question by people who urgently want to get better?
It depends, says James J. Irrgang, a researcher in the department of orthopedic surgery at the University of Pittsburgh and president of the orthopedic section of the American Physical Therapy Association.
“There is a growing body of evidence that supports what physical therapists do, but there is a lot of voodoo out there, too,” Dr. Irrgang said. “You can waste a lot of time and money on things that aren’t very helpful.”

(not in Ms Kolata’s article, but helpful for perspective…)
Sometimes, manual stretching by a physical therapist can actually eliminate a sports injury, he said…They are the exceptions. More common are the “voodoo” treatments, he said. And what might those be? None other than ice and heat and ultrasound, Dr. Irrgang said.
Ice and heat, Dr. Irrgang said, “can control pain a little bit” but “are not going to take care of the problem.” The underlying injury remains.”
But the lack of credible evidence-based clinical guidelines can make it difficult for payers to contest unnecessary treatment, especially in those states where regulations make it tough for payers to stop paying for unnecessary treatments.
There are credible, thoroughly researched clinical guidelines specific to PT, with the best focused not only on how many visits over how many weeks, but what should be done during those visits. I’ve reviewed all of the guidelines used in work comp for PT, and the most thorough are published by Expert Clinical Benchmarks, a subsidiary of MedRisk. (MedRisk is an HSA client)
Guidelines can’t be developed in six months; rather they must be carefully researched, assessed by acknowledged experts in the field, tested against claims and medical billing data, and reviewed periodically. There are far too many companies touting their ‘utilization review’ programs which are based on little more than the ‘same old same old’ guidelines that have never worked in the past, or quickly-assembled amalgamations of journal articles, neither of which will be of any help in front of a work comp judge.
What does this mean for you?
If you’re serious about managing PT, start with science.
UPDATE
I received an email from a good friend and colleague in the PT business who felt my post was an insult.

Let me reiterate – there are good PTs, and bad PTs.
There is good PT management, and bad PT management.
Some PT is quite useful, appropriate, and necessary, and some is not. When payers don’t use solid clinical guidelines it makes it very difficult for adjusters, case managers, peer reviewers, and hearing judges to differentiate between appropriate and inappropriate PT. And there’s lots of inappropriate PT in work comp.
In the course of my consulting practice, I’ve seen dozens of cases where claimants received more than a hundred PT visits over a year, and many where the total number was well over two hundred. This type of utilization is simply indefensible, and unfortunately often results in adoption of regulatory control mechanisms.
Some states have chosen to use caps on visits as proxies for utilization management, with 24 appearing to be the most common limit. This is at best a blunt instrument, but nonetheless it appears to have resulted in lower costs for physical medicine in the jurisdictions that have adopted the ’24 visit rule’.

Feb

Break out the champagne, but don’t loosen the cork

Posted by Joe Paduda on Saturday, February 6th, 2010 | Comments

The light at the end of the tunnel is getting brighter – and closer.
Yesterday’s jobs report contained good news for the economy and for the workers comp industry – unemployment dropped 0.3% to 9.7%, a rate that is still way too high, but better than last month’s 10% and certainly headed in the right direction.
The details are even more encouraging – the first gains in manufacturing jobs in two and a half years (!) (+11,000) and a small uptick in hours worked per week.
The other good news is a sharp bump in temp workers (+52,000), and a huge drop in the “number of persons who worked part time for economic reasons (sometimes
referred to as involuntary part-time workers) fell from 9.2 to 8.3 million in January. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.” (source BLS)
This last statistic is telling; sometimes called the ‘underemployment rate’, the data indicated a result of 16.5 percent in January, a welcome improvement from December’s 17.3 percent.
Construction and transportation continued to suffer, with both sectors seeing continued declines in employment. However, there are a number of significant projects funded by the American Reinvestment and Recovery Act, including a major nuclear site decommission on the Savannah River that will result in the hiring of up to 3000 workers.
There’s also a report that new home construction in the Atlanta area is picking up, improving the fortunes of developers and laborers alike.
Hiring is slowly increasing, and the ever-so-slight uptick in manufacturing, the first in two and a half years, is hopefully a leading indicator.
When employment picks up, so does work comp premium, and inevitably claims. The good work by NCCI indicates the injury rate typically heads up at the end of a recession as employees are working longer hours and more overtime, the pace picks up, and less experienced workers are hired.
What does this mean for you?
Higher work comp premium volume, more injuries, and more work for managed care and claims organizations. I’d expect safety and loss control people to start getting more calls as well.

Feb

Medicare and Workers’ Comp – NCCI’s view

Posted by Joe Paduda on Tuesday, February 2nd, 2010 | Comments

Recently NCCI released a white paper entitled “Medicare and Workers Compensation Medical Cost Containment”. The report goes well beyond a discussion of the relationship between Medicare’s physician and hospital reimbursement policies’ impact on workers comp; not that it doesn’t address that timely topic in some detail, but it also details the unforeseen implications of using Medicare reimbursement, the impact of the growing Medicare deficit on future health care, and the demographic factors and how they are felt differently in work comp and Medicare.
Ok, pretty geeky stuff I’ll admit, but interesting nonetheless. (wait, isn’t that contradictory?)
Here’s my summary of takeaways you should know.
The Center for Medicare and Medicaid Services (CMS) projects health care as % of GDP will go up one full point to 17.6% this year, driven by a declining economy while the demand for health care decline. US health care costs continue to be the highest in the world, by far.
Unlike group health, there’s an increasing disparity between Medicare reimbursement for specialty care, sx and radiology and Work comp fee schedule rates. Comp pays relatively more than group for these services.
One of the (many) issues inherent in basing WC on Medicare is that Medicare rates change for reasons specific to Medicare. As an example, the adoption of changes due to the budget neutrality factor legislation in 2008 changed the basic formula used in setting physician reimbursement. The changes increased relative value units (RVUs) and decreased conversion factors (CF). For those WC states that only adjust CFs, this may well have unintended consequences. The NCCI report stated “simply updating CFs for inflation and not offsetting the RVU change will give MARs that are about 8% higher than is likely to be intended.”
One conclusion in the study really stood out: CMS says the vast majority of Medicare patients “have access to specialty care, so it follows that many wc specialty care MARs (fee schedules) are well above what is needed to assure access [for wc patients]”.
As an example IL work comp pays 450% of Medicare, AK 510%, CT 360% for surgery.
That does raise a question: If most reimbursement for WC is below the WC fee schedule, does that not at least partially negate the importance of the FS as a price setting mechanism?
Finally here’s another finding worthy of consideration. The percentage of comp medical costs subject to physician fee schedules has declined from 58% in 2001 to 53% in 2006 (+/-). And, more and more procedures are being done on outpatient basis, and many states don’t have outpatient reimbursement schedules that have limits on utilization or even address it like Medicare’s methodologies do.
What does this mean for you?
Watch what happens with Medicare. Closely.

Jan

UPDATE – Changes at Coventry work comp

Posted by Joe Paduda on Friday, January 29th, 2010 | Comments

Coventry’s work comp division has recently gone thru some changes at the upper management levels. The overhaul has affected clinical ops, senior management, and sales, and according to insiders may not yet be complete.
Chris Watson is now COO, moving up after a stint of less than a year as COO of Coventry’s bil review operations (and a prior position as head of Coventry’s First Script PBM business). Derrick Amato, formerly COO, Clinical Services in the company’s New England offices) has moved out of Coventry, as has Peter Harn, who’s accepted a position as VP Corporate Sales at PMSI in Tampa.
Yet to be announced is the departure of one more senior member of the sales staff, who will be heading to a top slot at a regional work comp managed care company. (this is one of the worst-kept secrets in the industry as I’ve heard it from no fewer than three sources this week).
UPDATE – The individual who departed, Tom Shivers, has been named EVP of Healthcare Solutions Inc., a comp and auto managed care firm owned by Brazos.
Finally, Pat Sullivan, the well-regarded former head of marketing for Coventry Work Comp, has left as well.
So, what does this mean?
‘Big’ Coventry is continuing to look to reduce overhead and increase profitability, a path clearly and bluntly laid out by CEO Allen Wise when he took over what was then a struggling company a year ago. I have no idea if these changes were part of a bigger plan, or just coincidental, although the departure of four senior staff certainly reduces overhead, probably by a million bucks all in.

Jan

What’s replacing AWP?

Posted by Joe Paduda on Friday, January 29th, 2010 | Comments

As industry insiders have known for almost a year, Average Wholesale Price as published by First DataBank, is going away. Triggered by a settlement in a lawsuit filed in Boston in 2006, as of March 2011 FDB will no longer publish their version of AWP. (There’s a bit of disagreement as to timing, as one authoritative source indicates FDB is scheduled to discontinue the publishing of AWP in October 2011 (not March). I’ll find out what I can find out)
Regardless, FDB’s publication of AWP is going to cease. Sources indicate the National Association of Chain Drug Stores (NACDS) is suggesting a move to a new pricing methodology based on Wholesale Acquisition Cost, or WAC.
What’s with WAC?
WAC is the manufacturer’s list price for drug wholesalers and direct purchasers, excluding prompt pay or other discounts. (Note WAC may not bear much resemblance to the actual price paid, a problem it shares with AWP…)
NACDS and drug retailers would like to see a conversion to WAC; in fact NACDS has been advocating WAC for at least five years. WAC is generally accepted in broad swaths of the payer community; around ten states use WAC in their Medicaid pricing; the huge TriCare program is also WAC-based.
Here’s a bit of history.
The original legal case rested on FDB’s selection of McKesson as the sole source of drug pricing data. FDB’s AWP was based on the actual price that McKesson paid for the drug, plus a margin. For years the typical margin was 20%; six years ago McKesson changed the margin to 25% to make it ‘simpler to administer pricing internally’.
The price increase also earned McKesson points with its customers, retail pharmacies, who saw an immediate increase in profitability – profits on Lipitor immediately jumped three-fold after the 2002 increase. As part of the settlement in the 2006 case, FDB agreed to stop publishing prices two years after the finalization of the settlement (which is March of next year).
As cognoscenti are well aware, the suit has already had repercussions. On September 26, 2009, First DataBank and MediSpan, the firms that publish Average Wholesale Pricing tables changed their methodology to revert to the 20% margin, thereby reducing the drug’s AWP cost by almost four percent.
Wait, it gets more complicated. FDB is not the only publisher of AWP, and AWP, as published by RedBook and MediSpan, may be around in some markets for a while. The case for the persistence of AWP is that it is broadly used today, and RedBook and Medispan have not been charged with the kind of pricing manipulation that led to the FDB settlement.
Conversely, for some time AWP has been disappearing in generic pricing, where it is being replaced by MAC (maximum allowable cost), FUL (Federal upper limit), and other methodologies that seem to provide a more objective and less fungible baseline.
There’s another reason AWP may be on life support; it is broadly reviled as few payers believe, and with good reason, it has any real objective basis.
Implications for workers’ comp
As I reported several months ago, work comp regulators are wrestling with the issue, as 33 states base their work comp fee schedule on AWP (California doesn’t). Where they end up will be heavily influenced by the metric chosen by group/Medicare/Medicaid; drug spend in comp is about 2% of the nation’s total bill of $220 billion.

Jan

What if you were convicted of a crime that wasn’t?

Posted by Joe Paduda on Wednesday, January 27th, 2010 | Comments

That’s the question Sandy Blunt, former CEO of North Dakota’s state workers comp fund must be asking himself.
Because the most serious charge against Blunt was based on Blunt authorizing sick leave for and not getting expenses repaid by an employee who was terminated. Turns out the North Dakota state auditor had reviewed the situation and given Blunt a pass, and reported as much to prosecutor Cynthia Feland well before she went to trial. In fact, these ‘crimes’ were what enabled Feland to increase the charges leveled against Blunt from misdemeanor to felony status.
Sure, the misdemeanor charges were ludicrous; authorizing the purchase of small gift cards, balloons, and food for employee meetings and celebrations, and a raft of other contrived accusations which together wouldn’t amount to enough to give even the squeaky-cleanest among us any pause. In total, Blunt ‘signed for’ $2,693.15 over three years; all of it with the consent of the fund’s legal and financial departments.
But this is an entirely different situation – this isn’t just piling up a bunch of ridiculous charges in an effort to bring down a CEO, no, this is outright fraud on the part of the prosecutor.
This is a bit complicated, so stick with me here. The players are Cynthia Feland (prosecutor), Sandy Blunt (defendant), Jason Wahl (state auditor), Mr Spencer (ND state fund employee terminated by Blunt), and your faithful author (me).
Here’s an excerpt from communications from Blunt’s attorney and Feland’s office discussing the memo (authored by Wahl) which stated Blunt’s authorization of moving expenses and sick leave for Spencer, was not a violation of state law. First, from Blunt’s attorney to the prosecutor:

(paraphrasing the first part) “the Wahl memo read, in part, “we determined, in consultation with a representative of the Attorney General’s Office, there was not a voluntary resignation”. In the context of the specific allegation of failure to recoup moving expenses of Mr. Spencer, this quoted language is virtually controlling in Mr. Blunt’s favor. In the context of the entire case, its importance would have permeated virtually every aspect of the case, procedurally and substantively.
It is difficult for me to fathom the prosecutors in this case not knowing or not remembering the above quoted language of the memorandum when the decision was made in September, 2008, to add the allegation of failing to recoup the Spencer moving expenses to Count I in this case. How could the State believe that was a legitimate action in the face of the subject language in the memorandum? Rule 3.8(a), North Dakota Rules of Professional Conduct, provides, “The prosecutor in a criminal case shall … refrain from prosecuting a charge that the prosecutor knows is not supported by probable cause”. The subject language of the memorandum, in my opinion, rises to the level of no probable cause for the allegation of failing to recoup the Spencer moving expenses.”

When I got this transcript, I contacted Feland several times over the last few weeks, asked her directly about this situation, and she refused to address the key question – had she provided Blunt with a copy of the State Auditor’s memo which cleared Blunt of any malfeasance related to Spencer?
To her credit, the Prosecutor (who is actually running for District Judge (!!)) initially responded to my queries. Here’s the detail.
From me to Ms Feland on January 16, 2010:
Thanks for the response, but I’m not sure it answered my question. [I had asked in two previous emails if the Wahl memo was provided to the defense] I don’t want to mischaracterize or misunderstand your statement. Specifically, was the Wahl memo of November 2007 provided to the defense? [emphasis added]
Ms Feland’s response on January 19, 2010:
“All information in the Wahl memo has been disclosed to the defense. Given the extra large volume of discovery in the case, I have no way to provide to you the exact date of disclosure of the memo itself. The Wahl memo was also a public record at the auditor’s office. [emphasis added] Therefore, as I stated, there is no issue with it and it is a waste of time.”
Here’s what this means. The prosecutor has no record of providing the defense with a document that would have allowed the defense to prove that the prosecution’s main charge was not a crime. Not only that, but she infers that somehow the defense should have checked with the state auditor? This is incredible, unbelievable, and appalling. What other documents is she unaware of?
In this country, and in North Dakota as well, the prosecution must provide the defense with any and all potentially exculpatory evidence.
That is not a suggestion, or a recommendation, or a ‘if you remember to do it’, it is a legal requirement.
Failing to do so is prosecutory misconduct. The defense is not required to check with the state auditor, the county clerk, the registrar of voters, the town librarian or dog catcher – the prosecutor must turn over any and all information relevant to the case to the defense. Especially if that information destroys a central charge against the defendant.
What in the hell is going on in North Dakota?
And why are they persecuting a guy who’s performance at the ND state work comp fund was exemplary?
Blunt’s case is on appeal at the ND Supreme Court, and he is waiting for their ruling which could come any time. I fervently hope they reverse the charges and reprimand Feland.

Jan

Work comp medical costs – heading up…

Posted by Joe Paduda on Tuesday, January 26th, 2010 | Comments

To no one’s surprise. work comp medical costs appear to be on their way up, and at a rate significantly higher than the medical CPI.
First the what, then the why.
The latest data from NCCI indicate comp medical inflation (based on lost time claims) was 6% in 2008, just a bit more than the previous year. While I’ve no doubt the figure is accurate, it is important to understand that NCCI’s figure is derived from data that doesn’t include some fairly significant states – CA and NY being two of the more important.
Another data point comes from an admittedly highly selective source: from conversations with large payer clients, I get the distinct impression that their 2009 medical expenses are trending much closer to ten percent higher than 2008.
Add these data to the latest data from WCRI [subscription required] that indicates California’s trend is hitting 9% – a number that may well undervalue the latest figures as WCRI’s data is somewhat dated, and the picture gets a bit clearer. In fact, more recent data suggests the inflation rate is well into double digits, with the WCIRB reporting comp medical trend at 16%.
To be sure, California is a unique environment, with unique fee schedule quirks (including allowing hospitals to charge twice (!!) for surgical implants), a recent history of ever-lower work comp premiums, and a mix of managed care programs and providers that is quite diverse. Add those factors to the significant increase in ultimate medical costs due to the Ogilvie and Almarez/Guzman decision and California looks particularly problematic. Yet it also has a reputation as a ‘leading indicator’, a reputation that work comp observers would do well to respect.
What’s driving the increase?
There is a very long answer to this, which involves cost-shifting, increases in the number of individuals without health insurance, reduced Medicaid and Medicare reimbursement, ineffective fee schedules, physician dispensing of repackaged drugs, the growth of narcotic opioid usage, Part D, the nursing shortage and a host of other macro and micro influences, most of which are addressed elsewhere in other seventeen hundred posts on MCM (this blog, to the newcomer).
There’s also a shorter answer – misaligned incentives for work comp managed care programs, and payers’ increased reliance on managed care program revenue and profits. This leads to a focus on processing bills (which generate fees) and doing utilization review (which generate fees) and using huge provider networks (which generate fees) and sending lots of claims to case management (which generates fees), instead of actually managing the medical components of the claim.
Here’s one blatant example of this situation:
Workers comp payers spend hundreds of millions of dollars each year on medical management – pre-cert, utilization review, peer review, case management, clinical guidelines, and the variations and permutations thereof. Dozens of companies from mom-and-pops to regional players to industry giants like Coventry and Genex employ highly trained professional medical personnel to watch over the care delivered to injured workers, carefully reviewing and approving or not approving thousands of medical procedures.
Then, the medical bills come in to the payer. The frightening/amazing/unconscionable truth is that many non-approved medical treatments actually are performed, and billed for, and likely paid – because those determinations are not automatically fed into the bill review system’s database, and/or the bill review system can’t link the determination to the bill/provider/claimant.
How much of this actually occurs on a national basis is impossible to say, and there’s no doubt some payers have the links in place to ensure most if not all medical management determinations are linked to the right claimant/provider/event.
And because many (not all, but many) payers rely on managed care to generate departmental and corporate margins, they aren’t focused on the results of UR and bill review, but rather the dollars generated by those functions.
What does this mean for you?
Time to ask what’s important and what isn’t, and why you are in business, and how you produce results, and whether or not your incentives are aligned with employers’.

Jan

Revisiting my work comp predictions

Posted by Joe Paduda on Monday, January 25th, 2010 | Comments

A good friend and colleague has reviewed my 2010 work comp predictions and provided some incisive comment; he’s a very knowledgeable, highly experienced, very well placed exec and his thoughts are well worth your consideration.
Read them here.

Jan

How workers comp and group health differ…

Posted by Joe Paduda on Tuesday, January 19th, 2010 | Comments

I’m often asked how and why workers comp and individual/group health differ; the question comes primarily from investment and private equity firms, managed care vendors, and pharma.
The question is both simple and difficult to answer, as the follow-on query is almost always ‘why are the two so different, and when is work comp going to ‘catch up’?
First, the differences. The biggest difference is in the type of coverage; WC involves both medical and wage replacement while individual/group is only concerned with medical coverage. Of course, individual/group health is far larger in terms of dollars, as WC premium and equivalents are around $80 billion while individual/group health is more than ten times that at $840 billion.
Work comp:
– Regulated by states and mandatory in every state except TX
– Only covers injuries/illnesses occurring during or arising out of the course of employment
– Return to Work is critical
– The insurer owns the claim forever…or until the claimant is back to work, the claim has been settled and/or has reached maximum medical improvement
– Mix of injuries and illnesses is different, mostly Musculoskeletal/orthopedic, trauma and some cardiovascular (public safety in a handful of states
– Coverage is “first dollar, every dollar”; No copays, coinsurance, or deductibles, and no caps
– Drug “Formularies” tend to be fairly open
– Provider types – Occupational Medicine, Physiatry/PM&R, Orthopedics, Neurology, Neurosurgery, General practice
– Relatively few physicians handle most WC cases; 65% of claims in CA handled by 2.2% of physicians (<900 physicians) (source CWCI) - Comp docs only treat the occupational injury, NOT the 'whole person' Individual/Group health:
– Not mandatory or required by law
– Regulated by states (fully insured) and/or Federal government (ERISA)
– Covers all types of injuries and illnesses
– Wide range of provider types
– Physicians treat the ‘whole person’ for all conditions and co-morbidities
– Unconcerned about Return to Work
– Covers treatment delivered during the policy year only
– Employs cost sharing and seeks to affect patient behavior via deductibles, copays, coinsurance
– Drug formularies are dictated by payer and PBM, can be highly restrictive
As to the ‘why’, that’s a longer answer. The question usually assumes work comp is somehow ‘behind’ the group/individual world in terms of care management, reimbursement, and overall sophistication – a view not without some justification. However, the individual/group health world would benefit greatly from the emphasis, if not sole focus, on functionality that pervades and drives work comp medical care, a focus that is sadly lacking in the non-work comp world.
That said, some of the medical management approaches used outside of comp would certainly help address medical cost drivers – some form of financial incentive for claimants, more intelligent disease management and use of expert networks, tighter formularies and much, much more use of clinical guidelines would be a great help (if used appropriately).
Some will never happen – financial incentives for claimants is probably the most obvious example. And for good reason – WC covers employment-based issues, and requiring the employee to pay for care for a condition incurred as a result of employment would be a non-starter in pretty much every state.
What does this mean for you?
Group could learn a lot from comp; and comp still needs to learn more from group.

Jan

A must-read workers comp blog

Posted by Joe Paduda on Friday, January 15th, 2010 | Comments

Workers’ Comp Insider is one of the best-written, most topical, and entertaining blogs I’ve read, despite its focus on the mundane, usually unexciting world of workers comp.
Along with co-author Julie Ferguson, Jon Coppelman is the person behind the keyboard for many of WCI’s posts, and a better pair you won’t find anywhere (except at Colorado Health Insurance Insider where Jay and Louise do stellar work).
Jon’s skill is evident in his post earlier this week about the new head of New York’s work comp department – a (get this) former hedge fund exec.

Category: Workers Comp