Friday catch-up from the (still) frozen northland…

Hello all!

Well, (or rather, HELL!) it’s snowing in upstate New York…hopefully it’s a bit brighter where you are. Lots happened this week, so here we go.

First, this really needs a series of posts, but it’s so important that better fast than thorough. There is yet more evidence that the earning power of the vast lower-middle class (and poorer folks too) has been steadily declining.  And that’s a major issue for workers’ comp. Here’s the money quote from Neil Irwin’s piece in the NYTimes:

there really is a shift away from the sectors where less-educated workers can earn a decent living. [emphasis added] In 1990, 40 percent of the prime-age male workers without a high school degree worked as operators and laborers, a number that declined to 34 percent in 2013. Jobs in food service, cleaning and groundskeeping nearly doubled in the same span, to 21 percent from 11 percent. But it wasn’t an even trade: Pay for operators and labors was $25,500 in 2013, compared with $20,400 for the food, cleaning and groundskeeping category.

You’re not imagining it. The jobs that are being created for less-educated workers really do pay less than the ones that are being lost. [emphasis added]

What does this mean for work comp?   A few things come to mind.

  • if good-paying jobs continue to disappear, it is going to be increasingly hard to re-employ injured workers in positions where they earn the same pay they did pre-injury
  • comp premiums may decline slightly due to lowered covered payroll
  • we may see more longevity and less movement among workers currently in those jobs, meaning there are fewer opportunities for experienced workers to get re-employed
  • it’s theoretically possible that people working at jobs that are disappearing may see workers’ comp as a safety net

The net is the work comp system is going to be dramatically affected by this economic trend.  We need to be talking about it now, thinking about the potential implications, and seeking solutions – now.

The Catamaran acquisition of Healthcare Solutions was followed almost immediately by United Healthcare’s announcement that the company is going to buy Catamaran. Personally, I think HCS was the linchpin of the Catamaran – Optum deal; HCS’ unique position in the WC PBM, bill review, network, and related businesses made Catamaran so darn attractive UNH ponied up $14 billion just to get in the WC game.

Well, maybe not.  More seriously, UNH will own the third largest PBM, trailing only CVS/Caremark and Express Scripts, Inc.  The combination of OptumRx and Catamaran will fill about a billion scripts this year.  Catamaran itself was a relatively small player a decade ago; it grew rapidly via acquisition and diversification (along with ESI it is the only PBM active in the work comp and auto sectors).

With this transaction, UNH continues to diversify; the chart on page 2 provides a rather striking view into just how diversified this former HMO company has become.  For some, $14 billion seems like a lot of cash.  Not to UNH; this is a company with revenues that will likely hit close to $150 billion this year.  For you work comp folks, that is about 180% of total US WC premiums. 

(full disclosure – I owned a tiny bit of equity in HCS from a prior role on the Advisory Board of predecessor Cypress Care)

The good folks at Washington Labor & Industry (and other state agencies) are asking for public comment on their revised Prescribing Guidelines for Opioids. The pdf briefly summarizes changes from current guidelines, and is well worth your perusal.  Kudos to the Agency Medical Directors’ Group; they continue to lead the way for the rest of the country.

There’s a rather troubling piece in the latest Health Affairs about the cost and implications of over-diagnosis and over-treatment of breast cancer.  As one who is somewhat troubled by the proliferation of pink everything everywhere (cue the calls for my summary execution as insensitive and uncaring), I see this as evidence of a movement in danger of running amok.  From the article:

The average expenditures for each false-positive mammogram, invasive breast cancer, and ductal carcinoma in situ in the twelve months following diagnosis were $852, $51,837 and $12,369, respectively. This translates to a national cost of $4 billion each year. The costs associated with false-positive mammograms and breast cancer overdiagnoses appear to be much higher than previously documented. Screening has the potential to save lives. However, the economic impact of false-positive mammography results and breast cancer overdiagnoses must be considered in the debate about the appropriate populations for screening. [emphasis added]

Is breast cancer a major problem? Yes. As a major killer of women, and a disfigurer that does deep psychological damage, breast cancer is one of the major public health issues nationally.  That said, telling women who DON’T have breast cancer they do, and treating them for it, is awful indeed.

Finally, Darrell Bruga of LifeTEAM asked me if there is any technology platform already being utilized in workers’ compensation that is designed with the end user being the INJURED WORKER? Does anything like that exist where the claims examiner, caae manager, etc interacts with the injured worker digitally to communicate, provide information, provide health information, etc.

I don’t know of any such app; if you do please let me know – email at jpadudaAThealthstrategyassocDOTcom or just comment below.

The Everything-PPACA edition of Health Wonk Review

The ongoing rollout of the Affordable Care Act is the primary subject of this edition of Health Wonk Review – but there’s much more from the best of the health policy blogosphere – all summarized here for your reading pleasure!

PPACA rollout

Brad Flansbaum has written a thoughtful and compelling perspective on the impact of reimbursement changes on physician compensation, posing tough questions and seeming to come down on the side of longer/harder/tougher/knottier vs slam-dunk.

The coverage gap (wherein folks  have to pay a penalty if they go without insurance coverage) is covered by Louise Norris at Colorado Health Insurance Insider – in fact she’s more on the ball than any of the other sources folks normally turn to.  One key – if “your gap in coverage includes three or more months, you’ll be assessed a penalty for the entire period without health insurance; ” so being covered sometime during the fourth month doesn’t meet the test.

BTW, the IRS will assess a penalty for those going without coverage – and Louise has the skinny on those details too.

Bob Laszewski highlights the low consumer ratings of Covered California and the massive dollars poured into the site by the Feds.  Bob notes coverage expansion has been far below estimates, while costs have been far above.  Ouch.

Friend and colleague Hank Stern continues his merciless coverage of PPACA rollout with InsureBlog’s entry this biweek – a quick summary of notable news about the “ObamaTax”.  Double Ouch…

Another coverage gap is addressed by Anthony Wright of Health Access California.  Anthony reports on efforts by CA legislators to expand coverage to include undocumented workers in the Golden State.  Pending changes in immigration may well increase the number of people eligible for coverage under PPACA.

Some want to kill PPACA; others, more politically savvy, want to replace it. Writing in Health Affairs’ blog, Tim Jost discusses the various ideas/thoughts/concepts circulating among GOP Senators and Congresspeople, concluding that it isn’t really possible – given the GOP’s antipathy for the core goals of PPACA – to “replace” it.  And, most of the ideas floated to date won’t do much to increase coverage or reduce cost.

From MCM I submit a brief post detailing the cost trends for private health insurance, Medicare, and Medicaid.  Notably, the “Ms” have lower trend rates than private insurers.

SGR is dead!

Pigs will fly.  Lions and lambs will lie together.  The Cubs will win the World Series (well, that may be a stretch).  Those are events as equally unlikely as Congress agreeing on a bipartisan fix to Medicare physician reimbursement. Writing in, the estimable Louise Norris contributes another worthy piece dissecting the implications of the replacement of the much-reviled SGR with small, but predictable increases in physician pay.  Of note, there are also incentives to improve quality, extension of some niche health plans, and continued emphasis on increasing transparency.  All good things, which just shows things can get done on Capitol Hill...

Our favorite health care economist, Jason Shafrin, contributes a quick take on the passage of a Medicare reimbursement “doc fix” – a fix that, while it adds $141 billion in additional cost over the next ten years, also simplifies other programs intended to reward top-performing docs.

Stuff you need to know

Julie Ferguson has a sobering piece on workplace suicides, noting law enforcement, farming, and auto repair are the industries most affected. Julie teases out the common factors, provides additional insight into specific industry risks, and focuses on the need for mental health support for family farmers.  A great piece.

Returning from the annual HIMSS conference, contributor John Lynn shares his thoughts on what’s going to happen to Health IT in the near future; with implications for new entrants, entrenched old-line vendors, and the mid-tier outfits alike.

This biweek’s “hey, I didn’t know that! that’s pretty cool” moment comes from Jaan Sidorov MD, who reports that 

persons of low socioeconomic status are more likely to have smart phones vs. the “banked” population. They may not have a checking account, but, compared to other segments of the population, they are more able to use these devices to access and manage their “e”care. [emphasis added]

HWR veteran Roy Poses MD has a tough piece on hospital CIO’s perspectives that they, the CIO, “own” patient engagement.  Roy’s take is this is part of the problem with health care; generic managers who don’t actually deliver care think they “own” it.  Well worth a read.

Finally, One Happy Nurse reveals why a 7 hour wait in the ER isn’t so bad…and she should know – she’s been working in an inner-city Level II trauma center ER for more than two years.

Whew…after almost ten years of HWR, it’s great to see the best keep getting better!

The latest “innovations’ in physician dispensing

Despite overwhelming evidence that physician dispensing in workers’ comp leads to extended disability, higher medical costs, and higher indemnity expense, doc dispensing continues to expand.

Here’s why this is such a tough nut.

Back in the day, almost all physician-dispensed drugs were repackaged medications; since WC drug fee schedules were based on AWP, and repackagers could set their own AWP, it was child’s play to make millions by stuffing a few pills into a bottle,dispense to an unwitting claimant, and pocket the several hundred dollars.

In response, many states passed laws or implemented regulations eliminating the repackaged drug upcharge by basing reimbursement on the non-repackaged drug.

The dispensing industry quickly adapted by identifying and buying their drugs from “contract” manufacturers; drug companies that “manufactured” their own drugs, and therefore could set their own AWP.  Not surprisingly, these prices were far higher than comparable drugs from mainstream manufacturers; however, payers had no choice but to pay the price as required under statute or regulation.

Another wrinkle came out of the creative minds of those seeking to suck dollars out of employers and taxpayers; “novel” drugs.  These new creations were very slight tweaks of long-accepted formulations, tweaks such as increasing or decreasing the milligrams of one active ingredient by a negligible amount, thereby creating a “new” drug that could be sold thru dispensing docs.  At a price that was far higher than the “non-tweaked” drugs these variations mimicked.

In response, some states (IN, PA) have moved to ban or significantly restrict physician dispensing.  Others have attempted to do so only to find their efforts thwarted by the unbelievably well-funded doc dispensing lobby.  (Remember they are using the hundreds of millions they’ve sucked out of employers and taxpayers to pay their high-priced lobbyists and curry favor with medical societies; they are using your money to fight you)

At one time, I thought this was the right move as it would end the practice. As one who’s been fighting this battle for almost a decade, I still believe banning physician dispensing is a necessary and appropriate strategy, one every state should implement immediately.

However.  As we’ve seen, the doc dispensing industry’s creative minds are always at least three steps ahead of regulators, legislators, and payors.  So, while one would think banning doc dispensing – or significantly restricting it – would be the final answer, I’m not so sure.

Without getting too deep in the weeds here, my concern comes from years of watching these shameless profiteers outmaneuver us pretty successfully.  They will find any loophole, whether in a states’ pharmacy licensing process, medical board regulation, work comp statute or scope of practice to find a way to continue screwing employers and taxpayers.

For example:

  • docs are leasing space in their offices, at astronomical prices for just a couple of square feet to “pharmacies” which are nothing more than drug storage cabinets.
  • “pharmacies” are opening up actual locations next door to doctors’ offices and clinics; we have no way of knowing what, if any, financial relationships exist between the prescriber and dispensers.
  • dispensing docs are flying in to Hawaii, setting up shop in a clinic and seeing work comp patients for a day or two and dispensing drugs to those patients.
  • automated drug dispensing machines are appearing in medical office buildings; these buildings are often partly owned by the docs working there, and the machines’ owners are leasing space.
  • similar machines – totally automated, handling dispensing, billing, and record keeping – are being leased to docs in California and other states.

So, what’s the work comp industry to do?

  1. Ban physician dispensing, with tight language prohibiting physicians from profiting from or sharing in the revenues from dispensing.
  2. Include clauses in network contracts prohibiting dispensing by physicians.
  3. Refuse to pay for doc-dispensed medications unless evidence of clear medical necessity for immediate dispensing is provided. (I know, this is a thorny one, but it’s either that or continue to get screwed)

Which better controls spending – Private insurance or Medicare/Medicaid?

Before you read further, cast your vote…

Okay, a couple initial thoughts.

First, when comparing health care systems’ ability to control cost over multiple years, the best metric is the cost trend per member; this accounts for differences in demographics and membership growth.

Second, this only accounts for cost growth; not outcomes, patient or provider satisfaction, or efficiency.

That said, cost growth is the best metric to use when thinking about long term cost control, governmental budgets debt and deficits, and tax implications.

Drew Altman at the Kaiser Family Foundation has a simple graphic here that tracks cost growth over time.  The net – from 2007 to 2013, private insurance costs increased 29%, more than twice Medicare’s growth and five times higher than Medicaid.

(side note – the most recent data indicates Medicare has higher member satisfaction than private insurers…)

What does this mean for you?

If your goal is cost control, the answer is obvious.  However, personal and policy decisions are never simple.

The poster children of OxyContin

Back at the end of the last century, a wonder drug was introduced that promised to end pain without risk of nasty side effects.  The drug, OxyContin, was aggressively marketed by manufacturer Purdue Pharma; they even made a video featuring seven users who lauded OxyContin.

Fast forward just fourteen years. The video has disappeared. Two of the seven are dead; they were abusing opioids when they died. Another was also addicted, but overcame her addiction. Three still believe the drug helped them and one wouldn’t respond to questions posed by a reporter looking to find out the fate of the seven.

The story of the seven was reported by the Milwaukee Sentinel Journal; their story was also documented in a video.

It’s a short and utterly devastating piece.

In the original Purdue OxyContin marketing video, a paid physician claimed the drug resulted in addiction in less than 1 percent of cases.  Later, he acknowledged that his statement wasn’t based on any long-term studies.  And that’s just one of the litany of errors, misstatements, exaggerations, and outright falsehoods.

The best evidence we have now indicates from 3% to 40% of long term users are at high risk for addiction.

OxyContin and other Schedule II drugs do have their place.  They have helped many deal with acute pain.  They have also directly caused today’s opioid crisis and the explosive growth in heroin use.

Purdue’s quarterly revenues for OxyContin are about the same as the one-time fine they paid to settle a federal criminal case; with total revenues for the drug in excess of $7 billion, there’s no question it has been hugely profitable for Purdue and its shareholders. 

What does this mean for you?

There’s a rather uncomfortable question lurking here.  The American health care system is in large part driven by profit-making entities.

One can make a compelling case that the opioid crisis is directly related to the profit motive.  Yes, our convoluted regulatory process is involved, as is the tortuous legal process, and lobbying and politics.  But all these are intended to regulate, control, ensure safety and good corporate citizenship.

In this instance, our controls have failed, and failed miserably.

Thanks to Phil Walls of myMatrixx for the heads up on this; his post can be found here.



Where are the other insurers?

Noticeably absent from the Rx Drug Abuse Summit are non-work comp or Medicaid payers.  The third-party payer track is dominated by workers’ comp PBMs, payers, and researchers.  Sessions are well-attended, well-done, and worth while.

One wonders if private insurers selling group health or individual coverage don’t have problems with abuse of prescription drugs, or perhaps more precisely, don’t think it’s a problem for their business.

Well, it is.

Kudos to work comp for taking the lead on this critical issue.  Here’s hoping the rest of the world follows your lead; the chances for success are going to be much greater, and that success will come much faster, if private and public health insurers get involved.

What comp payers care about

Over the last two weeks I’ve been talking with senior execs at many large and mid-sized work comp payers about claims management; their approach, focus, staffing, priorities, perspectives.

What’s been most enlightening was kind of subtle; it just sort of appeared after I reflected back on my notes from a couple dozen phone calls.

Sure I’ve learned a lot about different approaches, unique thinking, resources applied and the pluses and minuses of using internal staff versus vendors in various roles.  No one pretends to know it all, and many are very open to hearing opinions and views that conflict with theirs. Where there’s universal agreement, in fact the only place that exists, is the reason for what they do.

They all want the best care possible for the claimant, especially for those claimants that are grievously injured; burned, crushed, electrocuted, blinded; those with brain injuries and spinal cord damage and amputated limbs.  It’s all about getting the patient to the best possible facility as fast as possible, identifying and contacting the best possible physicians to oversee care, and making very sure the patient’s family is kept apprised and abreast.

At times there are problems, or screwups, or delays, and these execs are, to a person, angry and upset when their company somehow fails. They take responsibility, figure out what happened, and do their best to try to prevent a future mistake. They do this because they really care about what they do and take their commitment to their policyholders and their employees very, very seriously.

I am absolutely sure there are execs at work comp payers who don’t think this way, who see their job as a job, claimants as problems, and are not terribly concerned about the wellbeing of those claimants.

I am also very sure this latter group is a minority in the work comp industry.  One of the exec’s comments capsulized what others were saying in different words; “we want to send the patient to the same provider we’d want our kids to go to if they were in this situation.”

And they do.

What does this mean for you?

The work comp industry has a lot of warts, but there are also a lot of really good people who strive every day to do the right thing.

Off to the Rx Drug Abuse Summit

The penultimate conference of the “spring” starts today in Atlanta, where the third annual Rx Drug Abuse Summit convenes this afternoon.

Specific to workers’ comp is the third party payer track; great discussions of Prescription Drug Monitoring Programs, the impact of opioids on worker’s compensation, legislative trends, and identifying high-risk claimants.

Thanks to Millennium Health for their lead sponsorship of the Summit; Millennium has been a consulting client for three years and I’m proud to work with them; they are good people looking to do drug testing the right way.

For those looking for additional education, can’t do better than Washington State L&I’s one-day educational conference on Evidence-Based Pain Care.  The sessions will review the new Agency Directors’ guidelines on Prescribing Opioids for Pain. Fifty bucks gets you educational credits, parking, breakfast and lunch…

Updates coming from the Rx Drug Abuse Summit from your loyal reporter…

Friday update

Happy spring…or what passes for it here in upstate New York, which is one day of temps in the high fifties followed by…snow.

Caught a few folks with my annual April Fools post; here’s a list of 10 that are waaaay better than anything I’ve ever done (Arnold’s dip is great) (altho I gotta say the post about Coventry acquiring United Healthcare was a beauty)

(I’m starting a new thing with today’s catch up; there will be a very brief “this may mean” after each snippet to give my take on potential implications)

Back to the real world…where I’m going to get all macro on you for a few minutes.

First up, an excellent piece on how the “news” distorts our world view.  For example, when Anna Nicole Smith died a few years ago, that story alone eclipsed coverage of every other country in the world – except Iraq, which happened to be at war.  In fact, Ms Smith’s untimely demise received10 times the coverage of the Intergovernmental Panel on Climate Change’s seminal report.

No wonder Americans don’t understand anything about anything not on the cover of People or watched on TMZ…

This may mean – it’s helpful to read non-US news sources; BBC and the Economist are two places to start.

Gary Schwitzer has an excellent primer on statistical significance for journalists, an area of study that seems to have escaped many of our leading writers. A key quote:

hard-and-fast rules on statistical significance are somewhat problematic. [emphasis added]

The somewhat arbitrary choice to set the p-value for statistical significance at less than 5% was made nearly 100 years ago.  There’s nothing magical about it. It’s just become a time-honored norm…

In focusing on statistical significance, let’s not forget to question whether even results with a p-value < 0.05 are clinically significant.  In other words, did they make a meaningful difference in people’s lives?

What’s happening in health care?

Hospitals in states that haven’t expanded Medicaid are struggling - big time.  Kansas is particularly hard hit.  What’s behind this is the PPACA reduced Medicare and other funding for hospitals, anticipating it would be replaced by increased Medicaid and private health insurance coverage, and a concomitant reduction in indigent care. When Kansas – and many other states – rejected Medicaid, the hospitals were left hanging. In Kansas alone, the drop in hospital revenue is almost a half-billion dollars.

The latest data suggests 283 mostly-rural hospitals are in financial trouble; since 2010, 48 have closed. This cannot be attributed solely to a failure to expand Medicaid, but it certainly plays a major role.

This may mean – potential cost shifting to private insureds and workers comp in non-Medicaid expansions states.

Wages are starting to creep up as labor markets begin to tighten and employers find they can’t find the skills they need unless they pay more.  There’s also more job movement, as folks leave their current employer for higher pay down the street.  This from The Economist:

In labour-intensive industries the American way of low pay, low staff retention and low motivation may be a false economy. Perhaps a third of Walmart’s staff are reckoned to quit in any given year, which could be one reason why it often scores poorly for customer service. In 2014 it said inept shelf-stocking cost it $3 billion a year—more than its planned pay rise. As the economy improves, many retailers are busy hiring new staff only to see others walk out of the door…

This may mean – higher indemnity payments, but potentially shorter disability duration as jobs are more plentiful.


Finally, in what has to be one of the bigger deals of this young year, United Healthcare is acquiring PBM Catamaran, which is just about to close their acquisition of work comp PBM/network/medical management firm Healthcare Solutions (an HSA consulting client). This will create a third major PBM to compete with Express Scripts and CVS/Caremark; the new OptumRx (UHC’s PBM)/Catamaran combo will rival CVS/Caremark in size with about a billion scripts annually; ESI remains the market leader.

This may mean – added strength for the work comp PBM business due to more buying power and clinical resources.

Work comp drug trends

Helios has just released their drug trend report covering spend, trends, and influencers for 2013 and 2014.  As the largest – and oldest – WC PBM, Helios has perhaps the broadest and “longest” perspective, able to draw on several decades of data to identify, parse, and analyze trends.

The PBM also has quite the stable of researchers, PharmDs, and technical writers who have combined to produce a report that is both readable and relevant.

A few key takeaways:

  • Drug costs on a per-claim basis are going up, driven by increases in AWP pricing.  The impact of manufacturers’ price increases is dramatic;
    • Generic AWP was up 10 percent in 2014
    • Brand increased 12.5 percent
  • Opioid utilization is trending downwards by almost every measure; fewer claimants are prescribed opioids; the average Morphine Equivalent Dosage has declined; and the number of MEDs per claimant has dropped as well.
  • Meanwhile, compounds now account for 5.6 percent of spend, an increase of almost 37 percent over 2013.

There is a wealth of additional information in the hundred-odd pages from updates on legislative and regulatory initiatives to an explanation of future cost drivers and external factors influencing utilization.

I’d also note that the Report in and of itself is revealing; the professionalism, graphics, attention to detail and broad coverage of all things work comp pharmacy show just how much work comp PBMs have matured.  While the first drug trend reports from a decade ago were helpful, there’s just no comparison.

Kudos to Helios.