Dec

Where were the payers in Florida?

Posted by Joe Paduda on Wednesday, December 9th, 2009 | Comments

The ongoing battle over the work comp hospital fee schedule in Florida continues, as challenges have been filed by two hospitals, the Florida Hospital Association, and FairPay Solutions that prevent implementation of a dramatic revision to existing fees pending further action by an administrative law court.
According to Mike Whitely’s piece in WCC, the suits, reported this morning in WorkCompCentral (sub req) allege that the FL Department of Workers Compensation

“DWC exceeded its rule-making authority and strayed into the legislative realm by abandoning the usual-and-customary charge system.
Florida Statute Section 440.13 gives the final authority for setting workers’ compensation medical fees to the state’s Three-Member Panel. But it specifies that all outpatient fees are to be paid at 75% of usual and customary charges, except as otherwise provided by state law. The statute separately sets the payment for outpatient surgeries at 60% of charges.
FHA and FairPay argue in the filings the proposed fee plan “enlarges, modifies and contravenes” the law by shifting to a Medicare multiple fee schedule.”

Fortunately for employers and insurers in the Sunshine State, the actions of FairPay and the hospitals will save them from much higher hospital costs, costs that the payers have done nothing to address.

I’m bewildered as to why payers – insurers, employers, TPAs, self-insured groups – have not vociferously protested the proposed changes. As I’ve noted repeatedly, the proposed changes will dramatically increase medical costs in Florida’s work comp system with no concomitant increase in value, return to work effectiveness, quality of care, or reduction in total claim cost or duration of disability.
No, this is nothing more than a giveaway to hospitals, a big increase in their income from treating workers comp patients. Here’s how work comp payers are going to be harmed by the proposed changes.
First, this methodology means work comp will pay 174% of Medicare for surgeries and 395% for other hospital outpatient services. Does anyone, at any payer, think that it is reasonable for them to pay hospitals four times more than Medicare does?
Second, the location of services will likely change dramatically to the higher cost hospital location. Thus procedures which were being done in offices will now be billed – at the much higher rates – by hospitals.
Yet not a single payer filed a protest that would have delayed the implementation of this onerous and costly regulatory change.
Not one.
What does this mean for you?
Who’s looking out for your interests?

Dec

How to know if you’re being ripped off

Posted by Joe Paduda on Monday, December 7th, 2009 | Comments

In the work comp managed care/claims world, some vendors’ revenue maximization efforts are getting ever more clever. I know, I know, I’ve posted on this several/numerous/multiple times before, but to my never-ending amazement, these practices continue. So here are the top ten warning signs to watch out for (sorry for ending with a preposition…)
Before you start, realize that all TPAs are not out to rip you off, all managed care vendors are certainly not either, and the soft market and unreasonable demands by employers have forced many claims administrators to look for revenue wherever they can get it.
That’s fine, as long as you know where your dollars are going…
10. your TPA won’t let you use your own managed care vendors.
9. your TPA won’t offer a bundled price, including all managed care services. Even worse if you never asked for one.
8. savings reports focus on reductions below charges and don’t show reductions below fee schedule/UCR.
7. the TPA determines which cases ‘need’ case management – and your case management fees continue to grow. sometimes this appears to be OK, as the cost per hour is a deal, but it’s highly likely the hours worked are ever-increasing.
6. the TPA won’t sign any statement like this one. Unfortunately, that doesn’t mean the TPA isn’t lying, as some may sign the statement anyway knowing it isn’t true.
5. the TPA won’t provide copies of any contracts with managed care vendors.
4. the TPA agrees to provide a great deal on claims admin services, with the fine print noting that they have complete control over managed care, investigative, legal, and other claims support services.
3. the TPA’s claims admin price is way, way better than the competition’s. There is no free lunch, and if the deal is too good to be true, rest assured you’re getting ripped off.
2. the claims staff you meet during the pre-implementation meetings disappears when claims come in, replaced by inexperienced/non-experienced/completely ignorant ‘staff’
1. you are paying for bill review on a percentage-of-savings-below-charges basis, which motivates the vendor to find the highest-billing, highest-utilizing providers and let them run roughshod over your bank account, all the while trumpeting the ‘savings’
I’m sure there are more; feel free to contribute your own.
What does this mean for you?
Kinda obvious, don’t you think?

Nov

Clarification – Last chance to avoid higher comp costs in Florida

Posted by Joe Paduda on Monday, November 30th, 2009 | Comments

Florida is scheduled to dramatically change the way hospitals get paid to care for workers comp patients, and if payers don’t get their act together, they’re going to be paying more – a lot more – for medical care.
WorkCompCentral reports today that a hearing, tentatively scheduled for this Wednesday to review the change, will not be held if no public comments have been submitted. That was the case as of the day before Thanksgiving.
Here’s why payers should shuck off their post-prandial lethargy and get their comments/objections/concerns in to DWC.
The revised fee schedule would have payers owing hospitals 174% of Medicare for surgeries and 395% of Medicare for other compensable charges. Workers comp is already the most profitable line of business for Florida hospitals, and this methodology makes it even more lucrative.
Clarification – in the original post, I noted that “according to an analysis performed by FairPay Solutions, this methodology will increase payers’ costs – today – by 181% for surgeries and 330% for other hospital outpatient services.” This was actually from FPS’ review of the Florida Dept of Financial Services’ 2006 analysis.
Not only are the hospitals going to prosper under this new scheme, work comp networks contracted with hospitals at a percent off charges are going to be rolling in dough, as the charges are going to be much higher, and their ‘savings’ are going to be as well.
It’s not just a price issue – Expect to see many surgeries and other services currently performed on an outpatient basis shifted to inpatient to take advantage of the much higher reimbursement. Thus procedures which were being done in offices will now be billed – at the much higher rates – by hospitals.
This isn’t just speculation. South Carolina put in a Medicare+ hospital fee schedule on 10/01/06. NCCI recently filed a 23.7% WC rate increase. Even though SC’s adoption of a Medicare+ hospital fee that pays hospitals less than the fee schedule proposed by Florida (140% of Medicare in SC vs 174% to 395% of what Medicare pays being proposed for Florida by DFS), paying SC hospitals more has significantly increased medical costs and utilization in SC.
For more detail on this (and be careful what you ask for), see here and here and here.
What does this mean for you?
If you’re a network or hospital, happy days.
If you’re a payer, higher costs – much higher costs.

Nov

Pharmacy costs in California work comp – time to reform the reform

Posted by Joe Paduda on Wednesday, November 25th, 2009 | Comments

In 2004, California implemented a set of far-reaching reforms to its workers comp system, including several specifically aimed at cutting medical costs. One of the more drastic changes changed the pharmacy fee schedule from one based on a significant multiple of AWP to one tied directly to the Medi-Cal fee schedule (California’s name for the state Medicaid program). Medi-Cal’s fee schedule is actually lower than most comp PBMs’ contracted rates with retail pharmacy chains; as a result most PBMs are ‘under water’ on their business in California or are at best at break-even.
While medical costs have come down dramatically after reform, especially in physical medicine, that has not been the case for pharmaceutical expenses.
In fact, costs increased significantly, driven by significant increases in both the average number of prescriptions per claim and the average payments per claim for prescriptions. In addition, payments for Schedule II narcotics, categorized as having a high potential for abuse and addiction, increased nine-fold after reform. Schedule II drugs are also strongly associated with extended disability duration, driving up both medical and indemnity costs.
According to the California Workers Compensation Institute, the average number of first-year prescriptions per claim increased 25 percent after the implementation of the Medi-Cal link, while the average drug cost per claim went up 37 percent. (Changes in Pharmaceutical Utilization and Reimbursement in the California Workers’ Compensation System, September 2009)
The problem with physician repackaging/dispensing has largely been addressed, yet costs continue to escalate. From conversations with PBMs that dominate the state, it is clear that California’s reimbursement levels don’t allow them to invest in utilization management and clinical programs, both of which are keys to controlling total drug cost. Studies conducted by NCCI clearly indicate the primary importance of utilization as the driver of comp drug costs; surveys conducted by my firm have confirmed this as well, as those payers focused on managing utilization have seen their drug costs drop while payers without strong utilization controls consistently see drug cost inflation rates well above average.
Clearly, the linkage to Medi-Cal has not reduced drug costs for California’s employers.
What does this mean for you?
If California doesn’t rethink its approach to drug fee schedules, expect your costs to continue to increase.

Nov

The National Work Comp Conference – first impressions

Posted by Joe Paduda on Wednesday, November 18th, 2009 | Comments

It’s good to be back in Chicago.
The ‘comp conference’, the shortened title given to LRP Productions’ annual National Workers Comp and Disability Conference, has recently been exiled to, of all places, Las Vegas. (Does anyone else see the slightest bit of irony in a risk management conference convening in the gambling capital of the nation?) Fortunately for wanna-attendees this year’s show is in Chicago (a city I like a while lot more than Vegas), a burg less likely to get the thumbs-down from corporate travel execs than Sin City.
I digress.
Here in random order are impressions from day one.
I’m impressed with the amount and variety of innovative approaches to old problems in evidence on the exhibit floor. That’s not to say that all are promising or even potentially useful but the level of effort is impressive.
For example, Coventry is actually talking about small networks. I know, I know, they’ve been talking about small networks for years but word is they may actually be doing something. More on that next week.
PMSI’s work on upgrading and strengthening their clinical programs, while not complete, is already bearing fruit. Look for more from this once-dormant PBM as it continues to invest in staff, systems, and technology.
Medata is promoting their proprietary UCR database, Tally. Unlike other UCR databases, Tally has not been successfully challenged in court. For payers concerned about litigation, this may well be a viable alternative.
Broadspire is reportedly working on new approaches to triage and early case management, building off their eTriage application/utility. This is not a standalone effort, but part of a larger initiative to revamp their approach to, and capabilities in, managed care.
Among other impressions – there are more private equity/venture capital types in attendance than in any other recent year. As I’ve indicated in earlier posts, activity has been heating up significantly of late, with the FairPay deal just the most recent.
And finally, there’s actually a Pet Insurance company exhibiting. Why, I don’t know. What pet insurance has to do with work comp or disability is not readily apparent.
Anybody have any ideas?

Nov

Change is coming to workers comp

Posted by Joe Paduda on Tuesday, November 17th, 2009 | Comments

And it is coming from all directions. California may be in the process of significant changes due to recent court decisions and the hangover from reform. Texas continues to debate, discuss, and deliberate alterations to their current system. The regulatory and legislative fronts in other states are noticeably quieter, but that silence is more than overcome by the noise from outside the regulatory system.
Brutal competition continues for what little self-insured business is left, while TPAs struggle to differentiate in a market crammed full of me-toos. Complacent carriers have invested little in adjuster education, training, systems, and decision support tools – partly because they have little to invest, but also because they aren’t thinking strategically.
The soft market is going to end – its got nine to fifteen months at the outside. Yet few insurers or TPAs are ready – they’ve been so busy cutting costs, reducing overheard, laying off talented and experienced WC pros that they are in no way shape or form ready to respond to rising medical costs, a renewed emphasis on return to work, loss prevention, and basic claims management. Not to mention the personal angst experienced by the folks left after the reductions – they’re so busy concentrating on keeping their heads down and staying out of the line of fire many aren’t worrying nearly enough about the next turn of the cycle – when costs start to head back up, and payers are woefully unprepared to do anything about it.
Add to the mix health care reform and its attendant impact on workers comp (cost shifting, changes in Medicare’s RBRVS, pharma price increases), a sharp rise in work comp medical expense, and a surge in claims that will come when employment rises once more, and you’ve got the makings of a pretty ugly picture.
The stuff isn’t going to hit the fan until mid 2010 at the earliest, and early 2011 at the latest.
Are you preparing?
What does this mean for you?
If your company isn’t ready, get your resume updated…

Nov

This week’s oddities and miscellanea from the world of workers’ comp

Posted by Joe Paduda on Friday, November 13th, 2009 | Comments

A few items of note have been accumulating on my desktop, each of them interesting/important but none worthy of a full post. Here they are for your enjoyment and edification:
– In a top candidate for worst idea of the month, WorkCompCentral reported [ sub req] today that the South Carolina Hospital Association wants surgical implants carved out of hospital bills and paid at 100% of the invoice price. You know, the invoice they draw up themselves in the finance office…
– Sources tell me there was a dustup at the Maine Workers Comp conference involving a representative from an IME company and a judge. The disagreement ended up in a fistfight, which resulted in the IME rep getting fired. I’m wondering if cocktails were involved, or if this was the result of a heated discussion over some fine point in Maine’s workers comp regulations. Or both?
– Word comes to MCM from North Dakota that there is a petition circulating demanding the Governor investigate Cynthia Freland, the prosecutor who may well have broken the law in her quest to convict former ND state WC fund CEO Sandy Blunt of something…anything. Fifty signatures are required, and sources in the far north tell me they are well on the way.
– In the ramp-up heading to next week’s annual work comp conference in Chicago, a preliminary and very unscientific poll indicates the new new thing is ebilling, and/or claims systems, and/or the renewed interest of the private equity/venture capital folks in work comp managed care.
– Speaking of which, the level of interest among the people with money to invest in work comp managed care is definitely up, although valuations are not. Typical multiples for deals closed, in process, and under discussion are in the 6 – 7.5x EBITDA range, with the high end rarely seen. There have been two factors limiting activity; low valuations are keeping owners from putting their companies up for sale, and the continued tight credit markets have made it difficult for investors to secure debt financing for deals. That said, the FairPay deal closed earlier this fall, and there are two others in the space that are said to be close to ‘done’.

Nov

Controlling technology, improving health, cutting cost – not as hard as you may think

Posted by Joe Paduda on Monday, November 9th, 2009 | Comments

The use – and misuse – of technology in medicine is not only a major cost driver, it is also a major cause of unnecessary pain and suffering.
Far too many carotid endarterectomies were performed in a misguided effort to reduce
If we are to have any hope of slowing down the rate of increase in medical costs, we have to stop the abuse of unproven and potentially harmful technology.
WorkCompCentral [sub req] has a great piece on a program run by the State of Washington that does just that. The Health Technology Assessment program “assesses various devices, procedures, medical equipment and diagnostic tests, then issues recommendations that public payers must follow[emphasis added]. Those public payers include the Department of Labor & Industries, which runs the state’s monopoly workers’ compensation program.”
According to an article in the New England Journal of Medicine, HTA determines reimbursement on these technologies for programs including:
“Medicaid, the workers’ compensation program, the state government employee benefit plan, and the corrections department [which] provide $2.9 billion in benefits annually to approximately 773,000 Washington citizens through direct fee-for-service plans”
Before the wingnuts start spouting about death panels, know that the HTA has been widely accepted by politicians from both parties, it passed with a single ‘nay’ vote in 2006, supported by both the state Hospital and Medical Associations, and while individual conclusions may draw opposition, the program itself is viewed very positively.
The process is rigorous. According to the NEJM;
“The program’s assessments are based on a thorough, systematic review of the evidence related to the effectiveness, safety, and cost-effectiveness of a product or service, with each type of evidence examined separately. After considering the “most valid and reliable” evidence on all three of these dimensions, the health technology clinical committee — which must be made up of practicing clinicians — arrives at one of three recommendations: covered without conditions, covered with conditions (such as criteria defining medical necessity), or not covered. The entire process must be transparent.”
HTA is important because it shows what can happen when government intervenes intelligently and carefully. So far, HTA has rendered opinions and set policy on:
* Arthroscopic surgery for osteoarthritis of the knee. (Not covered.)
* Discography for uncomplicated degenerative disk disease. (Not covered.)
* Implantable drug-delivery systems for chronic, non-cancer-related pain. (Not covered.)
* Lumbar fusion for uncomplicated degenerative disk disease. (Covered, with conditions.)
* Upright or positional medical resonance imaging. (Not covered.)
* CT colonography. (Not covered.)
* Pediatric bariatric surgery. (Not covered for patients 18 or younger. Covered with conditions for patients between the ages of 19 to 21.)
These actions have reduced costs by over $20 million since its inception three years ago.
What does this mean for you?
Payers should look closely at following Washington’s lead.

Nov

The Public Option in Workers Comp

Posted by Joe Paduda on Wednesday, November 4th, 2009 | Comments

Thanks to the good folks at Workers Comp Insider, I learned of an intriguing study conducted by Conning and Company that concludes (in part) that private work comp insurers don’t perform as well as public ones.
Here are a couple of excerpts from the article in Insurance Journal:
– 25 public and quasi-public workers’ compensation insurance plans perform better financially than the private market in a number of performance categories and at least as well when it comes to the bottom line.
– public workers’ compensation providers tend to have higher losses than the workers’ compensation insurance industry as a whole, they more than offset those losses with lower expenses, higher investment returns, bigger dividends to employers and better injury prevention efforts.
– through more stable reserves and superior investment income, state funds have managed to achieve operating income on a par with that of the workers’ compensation industry as a whole.
– Spurred by their mission that includes improving safety and their state’s economy, state funds blunt the impact of bigger losses through concerted loss prevention efforts. As Jablonowski put it, “They are able to convert the marginal and poor risk into something better.”
The public providers offer employers significantly higher dividends, which provide an incentive for businesses to adopt safety measures. These dividends can also create a competitive advantage and build customer loyalty, according to the study.
Congratulations to the good, hard-working, effective folks at SCIF in California, Texas Mutual, NYSIF in NY, the North Dakota state fund, Beacon Mutual in Rhode Island, and the rest of the state funds. While all is not perfect, and as Peter Rousmaniere has pointed out, often quite a distance from perfect, some of the findings of the Conning study are illuminating.
I’m also thinking the study should be carefully reviewed by Federal legislators, as the conclusions may help inform the discussion about the public option in health reform. I’d point to them to this quote:
“When you look at the entire insurance world, there are obviously insurance companies in the private world that do a great job of loss prevention control,”[the study’s author said] “But the unique thing about funds is that they all do it. Twenty-five of them and they all do it. So it’s not a random sample; it’s a sample that suggests that this group puts an emphasis on loss prevention control.”
That’s exactly, precisely what we need to do with health care – prevent preventable claims that lead to high costs and lousy outcomes.
What does this mean for you?
Once again, the health insurance world can certainly learn something from workers’ comp.

Nov

UPDATE – Ethics in workers comp managed care

Posted by Joe Paduda on Tuesday, November 3rd, 2009 | Comments

For the update, see UPDATE below.
Also, if you would like a copy of Todd’s marketing presentation, email me at infoAThealthstrategyassocDOTcom. The presentation is not copyrighted, marked confidential or proprietary, or otherwise protected from distribution.
Original post
The world of work comp managed care is highly competitive, with vendors willing to push pretty hard to win business or hold on to customers. That’s the way the market is, and as long as these practices don’t cross the line, may the better competitor win.
But sometimes that line is crossed.
A work comp PBM took my copyrighted work and without my permission, used it in a marketing presentation. They also copied my Survey of Prescription Benefit Management in Workers’ Comp and distributed it without my permission.
Not only that, but the PBM mischaracterized the work in such a way that it appeared I endorsed their approach and business model, if not them specifically.
I’ve repeatedly asked the PBM to retract their statements and have yet to receive confirmation that they did so. Rather than continue to spend money on attorneys, I’ve decided to publicly disavow any connection between myself, my firm Health Strategy Associates, LLC, and the WC PBM consortium I work with, CompPharma, LLC, and the PBM in question – one WorkComp Rx, Inc, and WCRx’ President, Greg Todd. Todd is also affiliated with Integrated Prescription Solutions.
Here are a couple specifics.
The introductory slide in a WorkComp Rx marketing presentation (entitled HSA Comparitive (sic) Summary ) states the: “findings [of my firm’s Annual Survey of PBM in WC] support WCRx’s performance Is The Best-In-Class”. No, it most definitely did not.
Another slide showed WCRx’s inability to comprehend the survey. The slide reads “Typical PBM Pharmacy network size is 55-58,000 pharmacies of which “penetration rate” is approximately 65% which totals 38,000 participating pharmacies”, showing his firm didn’t understand the definition of ‘network penetration’, which is not how many pharmacies participate but what percentage of scripts are processed thru the retail network. This led to this wildly inaccurate conclusion:

WCRx’s pharmacy network includes 99.7% of all US pharmacies (64,000+) and a 100% “participation or penetration” rate. That is more than 30,000 additional pharmacies with 100% participation than any competitor.

Yet another slide stated that the Survey found that Third Party Bills “…amounted to 40% – 50% of all W/C pharmacy bills.” Nowhere in the Survey do those words appear.
There are plenty more examples of misinterpretations, fabrications, and distortions, but you get my drift. It could be that Todd et al just don’t understand the work comp business, as his company’s website reads in part:
“Workers’ compensation is mandatory medical insurance that is paid for by employers and is required by law in every state.”
There are two errors here – WC is not mandatory in every state (i.e. Texas) and is not ‘medical insurance’.
UPDATE – IPS changed its website yesterday; the new description of work comp reads as follows:
“Workers’ compensation is a form of insurance that provides compensation medical care [sic] for employees who are injured in the course of employment, in exchange for mandatory relinquishment of the employee’s right to sue his or her employer for the tort of negligence.”
end of UPDATE
It also states that work comp medical spend is broken up thusly:
Hospitals & Physicians: $18.4 billion
Physical Medicine: $8.8 billion
Pharmacy: $6.0 billion
Diagnostic Services: $3.2 billion
DME/Home Healthcare: $3.2 billion
Cost Containment (UR): $1.8 billion
Perhaps Todd et al made these data up themselves, or have a source I’ve never heard of, or used data from one state to extrapolate to the rest of the country (no source is cited); I don’t know where else they could come up with these statistics, certainly not from NCCI or WCRI or NASI or DoL BLS reports.
When I learned of the misuse of the Survey’s findings and unauthorized duplication of the Survey itself, I immediately contacted my attorney, who sent a firm but polite letter to the PBM’s president, Greg Todd, a man heretofore unknown to me. The letter asked Mr Todd to stop using my material, inform all those he or his employees or agents had shared my material with that this was unauthorized, and tell them that I had not and did not endorse his company or approach.
Mr Todd sent a letter back telling me that I was fortunate to have his company spreading the word about me and my firm. But before he sent that letter, he called me and asked if this was about CompPharma, the consortium of workers’ comp PBMs I work with and am a part owner of. I said no, it was not; he replied that he knew other CompPharma members were using my work, whereupon I told Todd if they were it was with my permission. He then offered to join CompPharma and inquired about the fee.
He could not seem to understand that this was not about a fee. This was about his company doing something it should not have done, misusing my work and using my reputation and credibility to help him sell his stuff.
A follow up letter to Mr Todd went unanswered. As it appears that Todd is not going to respond to my request that he retract his statements and stop using my materials, I have no choice but to get the message out myself.
I am not today, have never been, and will never be affiliated with, work with, endorse or recommend WorkComp Rx, Integrated Prescription Solutions, or any other firm associated with Greg Todd. Any use by Mr Todd or anyone at either of those firms of any work product of Health Strategy Associates, LLC, CompPharma, LLC, or myself is done without my knowledge or permission.

Category: Workers Comp