Jul

Why do docs dispense meds to work comp patients?

Posted by Joe Paduda on Tuesday, July 9th, 2013 | Comments

Yesterday’s WCRI report on physician dispensing in Georgia post-reform is stuffed with insights into physician behavior and motivators thereof.

In April 2011, the Peach State capped the price of physician-dispensed repackaged drugs at the AWP of the original, non-repackaged drug, thereby eliminating the outrageous markups the docs and their enablers were charging employers and taxpayers. WCRI examined prescribing behavior pre- and post-reform; here’s my take on the more interesting results;

Post-reform, drugs dispensed by docs were still substantially more expensive than the same pills from a pharmacy.
Dispensing docs are more likely than non-dispensing physicians to write scripts for Tylenol, ibuprofen, Aleve, and Prilosec – drugs that can be bought cheaply over the counter.
Prescribing patterns among dispensing docs changed post-reform to include more expensive versions of similar drugs
After reform, drugs dispensed by docs cost 20 – 40 percent more than the same drug bought at a pharmacy; likely because almost all payers use a PBM, which provides the payer with a big discount on drugs bought at a pharmacy. WCRI: “Because pharmacy benefit managers (PBMs) often contract with pharmacies for discounted prices below AWP, it would not be surprising to see that the pharmacy prices were, on average, lower than the prices paid to physician-dispensers for the same drug.”
As in California post-reform, the price cut by eliminating the up-charge for repackaged drugs did not significantly reduce dispensing; 35% of scripts were dispensed by docs before reform, 28 percent after.

So, what can we surmise from the data. I’d suggest ~~several~~ one things.

Dispensing docs do it for the money. Duh.

Despite all the BS about patient care, outcomes, convenience, and access, they do it for the dollars.

Here’s proof.

Jul

Obamacare and workers’ comp – part 3 of 9

Posted by Joe Paduda on Monday, July 8th, 2013 | Comments

There are (at least) two additional implications of more people and more workers covered by health insurance; cost-shifting, and access to care. Each is deserving of careful and thorough consideration; for now we’ll touch on the highlights and leave a deeper discussion for another time.

First, the scope. 21 percent of working-age Americans don’t have health insurance. This varies widely by state, from 31% in Texas to 6 percent in Massachusetts, with several in the high twenties. That’s more than 40 million people between 18-64.

Access to care

Stands to reason that adding 30 million to the rolls of the insured is going to lead to a lot of demand for primary and specialty care; many of the newly-insured will have foregone routine care – primary and specialty – for years. They will need check-ups, tests, drugs, evaluation and counseling. Some will need major procedures; knee replacements, shoulder surgery, stents and cancer treatment.

A lot – best guess is somewhere over half – of primary care in workers comp is delivered by family practice/internal medicine/generalist physicians and physician extenders. Many injured workers go to their ‘regular’ physician when they get hurt, and we can expect this to continue. As there is already a relationship in place, those claimants who’ve had coverage are likely going to see some delays in getting into their doc for anything other than emergent care. The primary care access problem will arise from the newly-insured; these folks likely don’t have existing physician relationships, and will find it tough to get into see a family practice doc post 1/1/2014. As a result, they’ll head to the local ER, further burdening hospitals short on capacity. Of course, their care will get reimbursed at a pretty nice rate, and smarter health systems will divert WC patients to their in-house occ med departments.

Alas, there are not a lot of “smarter health systems” when it comes to occ med…and payers will face the usual set of problems/challenges encountered when dealing with providers who don’t know much about workers’ comp.

Specialty care is where the big problems are going to be.

Orthopedic surgeons get paid to do orthopedic surgery, and there are going to be millions of newly insured patients with conditions that may justify/require surgery. Stands to reason that specialty care – particularly for musculo-skeletal conditions – is going to be in high demand. The “good news” here for workers comp payers is Medicare, and many private insurers, are doing their darndest to reduce utilization and reimbursement for specialty care. And, as WCRI so ably reported just last month, workers’ comp pays a lot more for specialty care than most, if not all other payers. While just paying more won’t guarantee priority access, it will certainly help.

So, what’s an insurer/employer to do?

1. Stop buying care based on a discount below fee schedule; identify good providers and pay them fairly – above the fee schedule if necessary (or in Massachusetts, all the time).

2. Be easy to work with. Stop bothering the good docs with pointless UR requests; have your case managers help schedule PT and MRIs instead of badgering the doc and her staff.

3. Pay quickly.

Do this all now. It’s almost too late, but if you haven’t started reaching out to key docs yet, better late than never. Let them know you value them, and want to work with them, and make sure your billing and claims departments support that intent with action.

Or, just sit around waiting to see what happens, and then, when your claimants can’t get an ortho consult for six weeks, blame Obamacare.

I’ll have to deal with cost-shifting tomorrow – too much work to do today.

Jul

Obamacare and workers’ comp – Part 2 of 9

Posted by Joe Paduda on Wednesday, July 3rd, 2013 | Comments

Monday we kicked off the discussion of the impact of PPACA/Obamacare/health reform on workers’ comp with a review of the (very limited) direct impact of reform on comp. Today it’s the the impact of increased group and Medicaid insurance coverage on workers’ comp.

Let’s leave aside yesterday’s announcement by HHS that the employer mandate will be delayed till 2015; we’re after the long-term impact, so the one year delay will not be material to our discussion. There will be somewhere around 30 million more folks covered by health insurance post implementation, with 32% covered under Medicaid, 45% from the individual exchanges, and 23% from employers. Here are the major effects of the increased coverage…

Healthier workers heal faster – people without health insurance are not as healthy as those with coverage, and as healthier people heal more quickly when they are injured, the increased coverage means more work comp claimants will heal more quickly – reducing medical cost and indemnity expense.
The preventive benefits will help identify – and hopefully lead to early treatment for – health issues that can prolong/delay recovery. Diabetes, asthma, depression, hypertension, and other conditions often go undetected until something really bad happens – an acute episode requiring a visit to the ER is typical. Controlling these conditions and keeping them under control will speed recovery from injuries.
Many injured workers don’t have health insurance. If they have health conditions – say obesity – that are affecting recovery from an injury, the comp payer often ends up paying to treat that condition as well as the occupational injury. If the diabetic injured worker does have health insurance, the comp payer doesn’t have to pay to treat the diabetes – a key consideration as the condition can dramatically affect recovery from surgery.
There appears to be a correlation between the availability of health insurance and claim filing, but it isn’t what many think. A 2005 RAND paper notes “uninsured and more vulnerable workers are actually less likely to file claims than the insured.” Why?

“even repeat injury-sufferers are more likely to file during episodes in which their employer offers health insurance, but not statistically more likely to file during episodes in which they themselves are insured. This suggests that the workplace environment and employer incentives may have a significant, or perhaps even the dominant, impact on workers’ compensation filing.”

Next week — more on the impact of PPACA – bet you can’t wait!

Jul

Obamacare and workers’ comp; Part 1 of 9

Posted by Joe Paduda on Monday, July 1st, 2013 | Comments

The closer we get to January, the more interest there is in how health reform, aka PPACA, aka Obamacare will affect workers’ comp. In a meeting with a dozen industry executives last week the issue garnered much attention – as well it should.

While there are no direct ways Obamacare will impact work comp, there are a host of indirect ways it will – some of which are obvious, many rather subtle. I’ll explore the 8 “indirect impacts” over the next couple of weeks, but we’ll begin with a bit of table-setting.

First, recall that worker’s comp is tiny. Compared to the total US health spend of $2.6 trillion, comp’s $30 billion is just over 1 percent. The implications are clear – we are the flea on the tail of the dog, and a mighty big dog at that.

Second, while there is no direct impact on workers’ comp, there are a couple things in PPACA that affect occupational disease – some changes to the feds’ Black Lung program, and “LibbyCare”. The Black Lung changes are rather obscure and relate to reinstating presumption of cause and widow’s benefits provisions. Libby Care is a bit more complicated.

Some background is helpful. In the Senate, PPACA fell under the jurisdiction of the Finance Committee. The chairman of the Senate Finance Committee, Max Baucus, hails from Montana. Libby is in Montana, and Libby is the site of massive asbestos mining and manufacturing operations, and an attendant public health disaster. Not only were workers affected by asbestos-related illness, but residents in and around the town have also been harmed.

Briefly, Libby Care is the assumption by Medicare of the responsibility of providing care to Libby residents affected by asbestos and related illnesses/conditions. Victims will also receive special home care, pharmacy, medical device, and other services. The details are in Section 10323, Medicare Coverage for Individuals Exposed to Environmental Health Hazards.

While some might argue that Libby Care is the first step in some sort of federalization of workers’ comp, that is far-fetched at best. In fact, this is a powerful politician’s use of that power to serve a specific constituency; a one-time fix to a specific ‘problem’. That’s not to say that the work comp industry has done a good, or even passable, job in addressing occupational disease, but the Libby Care Amendment isn’t an attempt to Federalize management and treatment of occupational disease.

Color me a cynic if you will, but my sense is the Manager’s Amendment (technical term for the Libby Care language) isn’t so much the ‘camel’s nose under the tent’ as a political move by Sen Baucus (D MT) to curry favor and win votes.

Here’s why.
1. The Amendment requires a site be designated a “Public Health Emergency” by the Secretary of HHS. To date, Libby is the only site so designated, and the requirements for designating any site as a Public Health Emergency are stringent indeed.
2. The provision covers care for all affected residents and employees, not just workers. This is clearly far beyond ‘occupational’ and is much more of a public health issue than a work comp one.
3. Care is to be delivered through the Medicare system. This will require allocation of additional funding for each new site, something a cash-strapped CMS is unlikely to encourage.

Finally, PPACA funding includes about $20 billion from a medical device excise tax of 2.3%. This may add a few pennies to workers’ comp medical costs – but remember a) medical devices are just a few percent of WC medical costs, and b) markup on these items is already so high that another couple percent isn’t going to move the proverbial needle. While the device industry is lobbying its brains out to get this repealed, claiming it will cost jobs, hamper innovation, and bring asteroids crashing down on our heads (well, perhaps not that), a dispassionate analysis indicates this is a non-event.

Next up – the impact of increased group and Medicaid insurance coverage on workers’ comp…

Jun

OneCall acquiring TechHealth

Posted by Joe Paduda on Friday, June 28th, 2013 | Comments

Giant workers’ comp managed care firm OneCallCare Management will announce today it is acquiring Tampa-based TechHealth.

TechHealth, which has been on and off the block several times, provides a range of services – transportation, home health, DME, PT, pharmacy and imaging to the comp industry. As OCS already has a robust offering in all but two of the product lines, it may well be OCS’ owners were seeking a toehold in pharmacy and PT, while adding a bit more capability in transportation and home health/DME (I don’t see TH’s imaging as material to the deal).

With revenues well above $100 million and a solid technology platform, TechHealth will also add top line revenue and a different customer mix (heavier on the smaller-payer end) to OCM.

TechHealth got its big start serving AIG’s regional claims office in Florida around the turn of the century, the value proposition defined as relieving the adjuster of the hassle of handling the multiple services needed for complex claims.

TH grew in fits and starts, primarily by selling into claims offices with a few regional carriers and TPAs using their services on a broader scale. The one-stop-shop value prop, while appealing on its face, has yet to gain appreciable traction amongst the larger (top 20) payers. While there are several competitors with similar strategies, none has managed to become a major supplier across all (or even most) of the service lines with any of the big payers.

The OCM model is markedly different.

As the largest imaging, DME/HHC, dental, and transportation/translation supplier, it can make the argument that the promise of the one-stop shop is now reality. The addition of Harbor Health gives OCM insights into physician-ancillary service provider relationships, which it will undoubtedly use to increase the volume of services delivered thru OCM.

OCM’s model is anchored in the “original” OneCall Imaging’s expertise and deep experience in scheduling imaging; the new owners leveraged that expertise and combined it with similar services (if you’re getting an MRI, you may need transportation). The growth – primarily via acquisition – has been impressive, as OCM is now the largest single supplier of services to the WC market, eclipsing Coventry Workers’ Comp last year.

This isn’t the only deal you’ll hear about this summer; word is one – or more – of the big bill review firms are looking at a transaction, and there are at least two others expected to be announced before the kids head back to school.

What does this mean for you?

For payers, fewer choices. For entrepreneurs, an opportunity to launch something new and different, albeit a high-risk one.

Jun

Should workers’ comp pay more for medical care than group health?

Posted by Joe Paduda on Thursday, June 27th, 2013 | Comments

That is the question I’m left with after reading WCRI’s latest reports.

One compares group health’s payments for outpatient hospital services to work comp’s; the other discusses the use of group health payments as the basis for a work comp provider fee schedule. There is a wealth of insight in both studies; generally, states with fee schedules had lower work comp medical costs than those without

The latter is the subject of today’s post; it “focuses on the median nonhospital price paid for five common surgeries and four common established patient office visits in 22 large states for services delivered in 2009.”; it compares group payments to comp. By focusing on actual prices paid, the analysis factors in network and other discounts taken, increasing the “validity” of the data.

I’ve long thought providers should get paid more for care delivered to workers comp patients than for group, medicare, or medicaid. Comp involves disability management and all the communications, reporting, and complications inherent in considering disability in delivering care, and as we expect physicians and other care givers to take an active role in that process, by rights we should expect to pay them for that additional work.

That said, the dichotomy between pricing differentials for office visits vs. surgeries reported by WCRI strikes me as precisely the opposite of what should be. Specifically, the prices paid for office visits under group and comp were typically within 30 percent, with a range of 15 percent in about half of the states studied; in several states comp paid significantly less than group for office visits. Office visits are where and when the “disability management’ stuff occurs as the physician discusses the return to work plan, engages with the field case manager (if one is involved), talks with the claimant about the claimant’s job functions, physical capabilities and limitations, and other factors affecting disability. This takes time, thought, documentation, expertise.

Conversely, reimbursement for surgeries was generally much higher when the payer was workers’ comp than when a health plan was on the hook. Remember, the payment is specific to the surgical procedure; it does not include visits pre- and post-surgery. A knee arthroscopy is a knee arthroscopy; yes, there may be a little different documentation for WC surgeries, but the surgical notes should consider functionality, rehab plans, and prognosis regardless of who the payer is. Yet in only one state – Michigan – was the reimbursement essentially identical, while in the other 21 states, the reimbursement was higher for comp – in seven states comp reimbursed at least twice as much as group health.

Surgeons may argue that the higher reimbursement is necessary to ensure access; that argument, should it be made, is easily addressed by noting physicians are willing to accept much lower reimbursement for the identical procedure for most of their patients; there’s no access problem for group health patients despite the lower reimbursement.

In contrast, reimbursement for office visits should be higher for workers’ comp, for the reasons noted above. If not for the office visit code itself, than perhaps states should institute a different code for disability management (some payers already do this).

What does this mean for you?

From here, this looks like another example of under-valuing primary care and patient – physician interaction, while over-valuing procedures; doing stuff TO patients.

Jun

Workers’ comp rates are up, but still no profit.

Posted by Joe Paduda on Tuesday, June 25th, 2013 | Comments

While workers’ comp premiums have been increasing steadily for two years, the industry is still not profitable.

Why not?

There are a bunch of pluses and minuses influencing profitability; premiums were up 7 percent in 2012, driven by higher rates and growing payrolls. Rates have been trending up for eight consecutive quarters and increases are now in the double-digits. That helped improve 2012’s combined to 110.

On the negative side, today’s historically-low interest rates get part of the blame, but their impact is somewhat offset by declining frequency (down 5 percent last year). Fitch’s latest report noted the industry still suffers from reserve deficiencies, making the current combined ratio a bit optimistic.

The industry’s performance is simply a composite of all insurers, and here’s where it gets really interesting. Couple things stand out from Fitch’s analysis (access is free to registrants).

Companies with weaker underwriting performance shrank their books; specifically, all insurers with combineds over 100 reduced their premiums over the last five years.
Liberty Mutual is once again at the top of the market-share list, despite dropping from 11.1% share to 9.9%. AIG has reduced its exposure by over $3.5 billion over the last half-decade.
Fitch notes that the implementation of health reform under PPACA will likely affect “volatility in workers’ compensation claims costs”; that’s certainly true, but I’d suggest the impact of long-term opioid usage will be rather more significant.
The report authors also note “the industry will continue to report unfavorable reserve development” in work comp over the next several years. In English, they are saying insurers haven’t set aside enough money to pay for the future medical and indemnity expenses of claims that have already occurred.

I remain convinced most insurers don’t have a firm grasp on medical costs and drivers thereof. Fitch’s comments about reserve inadequacy support that belief, as do anecdotal discussions with executives. I detect a distinct uneasiness when discussing medical costs, a sense that things are not as under-control as one would think from reading industry reports and company press releases.

What does this mean for you?

Rates will continue to go up; more employers will go self-insured; and the carriers we expect to be the biggest will likely not be in a few years.

Jun

Pharmacies’ self interest v silos v ignorance

Posted by Joe Paduda on Thursday, June 20th, 2013 | Comments

$1.7 billion in workers’ comp drug costs are for drugs dispensed by physicians.

Why don’t the big retail pharmacies care about physician dispensing in workers’ comp?

Why isn’t Walgreens, and CVS, and Rite-Aid, and Medicine Shoppe up in arms about this?

After all, claimants who get their drugs from their docs don’t visit a drug store, don’t pick up those other essentials, don’t establish a relationship with a pharmacist and possibly a store.

I’ve been stumped by this for years. Here’s why. About 65 percent of a chain drug store’s sales are for drugs; for independents its 93 percent. The margin on most of those medications is pretty thin, and almost non-existent for Medicaid drugs in some states. Chain drug stores sell drugs to get people to come in and buy toothpaste and magazines and convenience foods and cosmetics, where they do make a decent profit. And independents live and die on drug sales; and these days, most are dying.

Yet anyone who’s tracked anti-physician dispensing efforts in Florida, Maryland, Hawai’i, Michigan, Illinois – anywhere, has not seen hide nor hair of anyone remotely associated with a drug store.

Is this a case of silos, where the department/person responsible for workers’ comp drug sales has no power or influence or is measured on percentage margin and not total sales or profits (because WC drugs are VERY profitable for pharmacies; the margins are many times those of drugs dispensed for group health plans).

Or is it ignorance, where the powers-that-be don’t care about WC drugs because they only represent a couple percentage points of scripts? Of course, the total would be a lot higher if physicians weren’t dispensing, and this ignores the much higher profits on those drugs, but hey, ignorance is bliss, right?

Whatever the reason, it is abundantly clear that insurers, employers, PBMs, and others (me, for instance) have been fighting chain and independent pharmacies’ battles for them.

If independents don’t sell drugs, they’re dead. And more are dying every day, as overall drug sales level off, and they are increasingly unable to compete with the chains and huge food-and-drugs. Yet I’ve never seen anyone from an independent pharmacy, or their national trade group, engaged in the issue.

Folks on workers’ comp are either employed or getting a check to cover lost wages; they need toiletries and food and other medications and batteries, stuff they’ll likely get from the Big Box store if they don’t come in to the corner drug store to get their workers’ comp meds. Yet NACDS and the other “advocacy” groups are nowhere on this issue.

It isn’t like I – and others – haven’t tried, multiple times, to get drug stores engaged. For whatever reason, there’s been no response.

Meanwhile, the investment and provider communities have figured out that workers’ comp is a great business – profitable, with relatively low regulatory risk. Comp is an “insulator”, a payer type that is removed from PPACA, Medicaid, Medicare, and all the changes coming down from Washington; a service line not affected by budget cuts or Obamacare.

At some point, perhaps when the last independent drug store is about to close up shop, someone may say “gosh, those dispensing docs sure killed our comp business; we could have used those dollars to stay open and profitable.”

Or a chain store exec may wonder “gee, why is my average profit per script lower than ever?’

Or, more likely, Not.

Jun

The latest workers’ comp intel

Posted by Joe Paduda on Monday, June 17th, 2013 | Comments

The weather is heating up, and so is the workers’ comp services industry. Here are a few of the latest and greatest.

The big news remains CWCI’s report on opioid usage; some are using the headline that use is “leveling off”, which, to be completely factual, is, well, factual. It is also just like saying “new cases of bubonic plague in (insert your home town name) have leveled off after hitting an all time high and killing lots of your neighbors.”

Oh goodie.

On the upside, Accident Fund Insurance Company just received a patent for “evaluating medical service providers and directing claimants using a computer and a database…” The rationale, in patent-ese, is this:

“a method and system is needed to transform the processing of claimants. Without the additional step of directing certain types of claimants to specific medical service providers, not provider networks, the success of directing claimants cannot be effectively measured and used to redefine medical service provider groups and claimant groups in order to improve efficiency and optimize medical costs at the claim level.”

As a consultant, it is rare indeed to see something you actually worked on years ago reach full implementation. And immensely gratifying as well. Kudos to Jeffrey Austin White, Craig Bilinski, Pat Walsh, Marsha Fenton, Lisa Riddle, and their colleagues at AF. While others continue to talk, you guys are actually doing it.

Healthcare Solutions has hired industry pro Rich Leonardo to run PBM sales. Rich is a highly-experienced and well-regarded exec with a long track record of success. He’s a good guy too. Good move by HCS; Rich’s experience running sales for Express’ WC PBM will be invaluable.

PMSI continues on a roll; heard they landed the State Fund of Wyoming PBM contract. Word is this is in the “several million dollar” range; implementation is underway.

Saw a press release recently that Medata had won the bill review business for a Florida-based auto insurer; that got me interested in re-visiting the medical bill review business to see what’s been going on. Lots of private equity attention being paid to this space of late; word is one or more of the jumbos are for sale. Not surprising; if anything the investor activity in P&C services is – if anything – heating up.

Of note, auto insurers in some states (Michigan and Hawai’i in particular) are seeing a big increase in physician-dispensed medications, an unfortunate occurrence that is not only driving up medical costs and will lead to higher settlements, but adding confusion and delay to medical bill processing. Insurers are wrestling with how best to address bills for physician dispensed drugs, as some are extremely costly and their medical appropriateness (Prilosec et al) can be rather questionable at times. And yes, this is hitting the PIP/auto insurance lines – and in many cases completely using up the available medical coverage.

Then there’s this…A Michigan company is hiring 50 (!) reps to sell a compound pharmaceutical narcotic pain cream. Sources indicate a local doc is behind the venture, undoubtedly designed to bring much-needed relief to those poor souls who can’t swallow pills. Both of them.

Proving that I’m waaaay behind in my mandatory reading and reporting, a few weeks back Chris Walsh wrote a great piece in WorkCompWire about improving workers comp outcomes with systems automation. Chris started his career in the HMO IT business and knows of what he speaks. Well worth a read.

Finally, now that Aetna’s completed the legal/financial part of acquiring Coventry, the real work begins. Well, actually, continues – because the two companies have been working on integrating/combining their operations for months. Don’t expect to see Aetna sell off the workers’ comp business – because a) it makes a ton of money; b) it is a regulatory risk mitigator; and c) even if they wanted to – which they do NOT – they can’t.

Jun

Workers’ comp opioid usage in California…

Posted by Joe Paduda on Friday, June 14th, 2013 | Comments

Schedule II opioid scripts in California increased 557% from 2005 to 2012.

According to a study released by CWCI yesterday, growth seems to have topped out, with S-IIs accounting 7.2 percent of all drugs prescribed in the 4th quarter of 2012 after hitting 7.1 percent in 2011.

Some may see this as progress. If “progress” is defined as not getting any worse, perhaps that’s accurate. I’d suggest that stabilizing at 7.2 percent of scripts and 19 percent of drug spend for drugs that have little place in treating workers’ comp injuries is only good news if one doesn’t consider the long-term impact of opioids.

Claimants taking opioids over the long term are not going back to work, aren’t going to settle claims, and are going to cost far more than claimants – with the same diagnoses – that aren’t on opioids. Lest you think this another “insight” from Captain Obvious, ask your actuaries if they have projected future costs factoring in the impact of opioids.

Fact is there is precious little research into the impact of opioids on financials over the long term. I’ve asked many industry experts, insiders, and thought leaders, along with several comp actuaries, if they’ve heard of or done much in the way of analysis. With some notable exceptions, the answer is “not really”.

In defense of actuaries, they’re using historical data to predict the future. So, the financial effect of a pentupling of opioid usage hasn’t revealed itself in the data yet; or more accurately, the impact has yet to be fully realized.

When it is, the stuff is going to hit the fan.

I’d note that these data refer to California’s experience and may not be – and in all likelihood are not – representative of the entire country. I’d hazard a guess that some states have yet to reach their “opioid peak” while others may be close to stabilizing growth. Scary thing is, outside of California and Texas, payers just don’t know.

We do know that initial opioid usage in Texas has decreased thanks to the closed formulary and tough UR standards. We also know that payers using PBMs have seen declines in opioid usage (see here and here).

What does this mean for you?

Do you KNOW the financial impact of opioids?

Category: Workers Comp