Insight, analysis & opinion from Joe Paduda

Jul
30

Vendors rating buyers…

Customers and prospects rate vendors all the time – yet vendors never rate/review customers or prospects.

I’m as guilty as anyone else for not seeing the obvious; sellers’ views of buyers are just as important as buyers’ views of sellers.  Sure, I wrote about problematic purchasers and their arrogant behavior – but that was 14 (!) whole years ago.

This came to light recently when I was thinking about conversations I had with a couple of buyers over the last few months. Buyers’ perceptions of how they dealt with vendors was quite different from vendors’ views. As in pretty much opposite; the buyers saw themselves as collaborative, collegial, and open to new ideas and perspectives. They opined that their buying criteria prioritizes forward thinking, innovation, and aligned incentives.

That was NOT how they were perceived by vendors. Far from it.

The buyers in question were perceived as dictatorial, dogmatic, and difficult to work with. The buyers always squeezed vendors on price and forced concessions while requiring detailed Service Level Agreements with financial penalties.

The Golden Rule applied – She Who Has the Gold Rules.

Of course all buyers are not like thatsome are collaborative and thoughtful and really looking for partnerships that benefit all parties. (Thank you HSA clients!)

It goes beyond the purchasing process; some buyers don’t get the “partner” thing. They don’t realize their success is driven by collaboration and teamwork, that this requires the customer’s cooperation and an investment of time, energy, and often IT resources. Instead they require/demand/mandate the vendor deliver on SLAs while making it darn near impossible for them to do so.

So…I’m thinking of surveying workers’ comp vendors about their views, opinions, and experience with WC payers.  Of course as with all our surveys, responses would be completely confidential. If we do this, we’ll require respondents to identify themselves so we can verify they are who they say they are. Once that’s done, identifying information will be erased.

If you’re interested in participating, shoot me a comment in the box below. All comments are held for approval, so I won’t publish yours if you ask me not to.

What does this mean for you?

This will be fun.


Jul
29

Infrastructure’s implications for workers’ comp

Hundreds of billions of dollars will be spent on heavy construction and everything that goes into that – steel, aluminum and concrete; wire and cable; glass and pipes; rail cars, track, and signaling equipment;  heavy equipment; electric vehicle charging stations; and of course labor.

It will fix huge infrastructure problems – including the Brent Spence Bridge which spans the Ohio River between Cincinnati and Kentucky and desperately needs an overhaul. (the Bridge carries 3 percent of our GDP every year, has no shoulders, is used by tens of thousands of commuters each day, and has frequent accidents that snarl traffic and screw everything up.)

Texas’ electrical grid is also targeted for a major – and critically needed – upgrade. Rail, highways, tunnels and port facilities around New York City are in desperate need of major repairs. Rural America’s access to broadband – essential for agriculture and education – is pathetically sparse. (think DSL…remember that?)

Here in upstate New York, the City of Syracuse still relies on water pipes that can be 180 years old and, wait for it, some are wood. Albany just discovered some of their pipes are even older – and yes, made of wood.

The infrastructure bill will likely pass and be signed into law, but that’s just part of President Biden’s economic plan, the rest of which will be addressed in a massive bill that won’t have to garner any Republican Senators’ votes due to reconciliation. [explanation at the link]

The budget proposal will include additional investments in human capital that will expand child care, increase protections for workers, ramp up spending on community colleges and education and add funding for clean energy projects. This last will likely have the biggest impact on work comp, but the rest will add tens of thousands of workers to the child care and education sectors.

So what does all this mean for workers’ comp?

Two things – the improvements/upgrades/fixes will generate more premium dollars, more injuries, and more claims; expect this to start ramping up in a year or so, and continue for a decade plus.

As our amazingly crappy infrastructure gets better, those improvements should make us more competitive, remove bottlenecks (here’s looking at you, Brent Spence Bridge) and spur growth – which will add jobs and increase work comp premiums.

What does this mean for you?

More and better infrastructure = more dollars flowing into the work comp industry.

 

 


Jul
27

that giant sucking sound…

Is coming from hospital trauma centers vacuuming thousands out of your wallet.

Trauma centers are supposed to handle the worst trauma cases – those from major car accidents, gunshots, airplane crashes, building collapses – you get the picture. Smelling gold, some hospital systems – including HCA – figured out that “activating” trauma centers lets them charge fees up to$50,000 per patient – even if that “trauma center” never actually treats the patient.

The fact that HCA has opened trauma centers in 90 of its 179 hospitals – many in close proximity to other trauma centers – indicates it is not a pubic health need as that “need” is already being met.

Shockingly, Florida is once again the poster child for what look to be abusive billing practices.  From Kaiser Health News:

In Florida alone, where the number of trauma centers has exploded, hospitals charged such fees more than 13,000 times in 2019 even though the patient went home the same day,

Florida trauma activation cases without an admission rose from 22% in 2012 to 27% last year, according to the data. At one Florida facility, Broward Health Medical Center, there were 1,285 trauma activation cases in 2019 with no admission — almost equal to the number that led to admissions. [emphasis added]

Work comp and auto alert…

Peter Johnson penned a deep dive into the explosive growth of trauma centers in the latest edition of Health Plan Weekly [subscription required]. In his article, Peter reported the number of Level I and II trauma centers almost doubled from 2008 to 2020, going from 305 to 567.

From his piece (Peter was quoting me):

It is abundantly clear this [the growth in the number of trauma centers] is not due to a years- or even months-long dramatic increase in apartment building fires, accidents, gun fights, or multi-car crashes.

Trauma used to be defined as high-acuity, emergent cases involving severe injury. Not any more at some of these facilities. Reports abound of patients with minor injuries requiring stitches, cold compresses, and even just a baby bottle and a nap billed for trauma activation.

What does this mean for you?

Any facility bill with a trauma center charge must be subjected to very careful and thorough review. Especially in states that allow higher payments for so-called “outliers”.

Auto insurers – pay attention!!


Jul
26

Canaries and coal mines.

Prior authorizations – aka 1-800 NURSE MAY I – are either an absolute necessity if you are a healthplan or a complete waste of time and money and affront to the medical profession if you’re a provider.

Of course, reality is somewhere in the middle.  Regardless, in what I will argue is due mostly to payers being dumb, a new law will strip most Texas payers of the ability to unilaterally set and enforce prior auth requirements.

As of September 1, Texas healthplans won’t be able to require prior authorization for certain treatments if 90 percent of the treating doc’s medical orders for those services over the last 6 months were deemed medically necessary by the insurer. The details are yet to be released; how this gets implemented, how insurers are supposed to track compliance, how the inevitable disagreements will be dealt with and all the other devilish details are TBD.

We do know that the “gold carding” of docs (the term used to describe docs who meet the 90% threshold for a healthplan or insurer) “only applies to payers that fall under the state’s jurisdiction and are not state funded.” It appears the law – HB 3549 – applies only to:

  • HMOs,
  • Medicaid plans, and
  • PPOs and EPOs offered by health insurers.

Self-insured employers are exempt as they are regulaterd under ERISA and thus outside state jurisdiction.

I’ve long argued – and strongly suggested to consulting clients – that they stop requiring good docs to submit to prior auth requirements, instead monitoring them on the back end via smart data analysis.  The vast majority of procedures that do go thru the PA process are approved – and the process can delay treatment, costs treaters and healthplans money, and add to the general frustration with healthcare and insurers.

Docs argue that PAs are unnecessarily burdensome…but I give little credence to their arguments; if they weren’t prescribing too many opioids, doing unnecessary surgeries, requesting unneeded tests and MRIs, PAs would not be necessary.

Similarly, healthplans’ argument that “The use of prior authorization is relatively small — typically, less than 15%”[of medical care] is ludicrous – the cast majority of healthcare is routine, and 15% of all “healthcare” is a gigantic number of services/drugs/procedures/treatments.

Canaries were an early warning sign of bad air in coal mines; when they stopped singing and died, miners knew to get the heck out fast.

What does this mean for you?

This is the first of what we will see in many states, and should be a wake-up call to all payers – health, auto, workers’s comp alike.

 

 

 


Jul
23

Well, I got that one wrong…COVID-related treatment delays

Didn’t happen.

That’s the result of a just-published study conducted by Olesya Fomenko PhD, one of WCRI’s talented researchers.

Not only were there no delays during the first half of 2020, when the pandemic was raging – but there was a slight improvement in waiting times for some services.  This may have been due to non-COVID patients actively avoiding medical treatment facilities (that’s my speculation, not Dr Fomenko’s).

This was true even in states hit hard in the early months of the pandemic; of note the waiting time for surgeries decreased by 1/3.

The same held for pretty much all injury types; soft tissue injuries, fractures, lacerations, you name it, none had delays in treatment. 

The report documents decreases in emergency room visits in Q2 2020 for lost time claims – again this may well be due to patient reluctance to go where COVID may be present. It’s also a reminder that all employers should do everything they can to ensure workers with non-emergent injuries DO NOT SEEK TREATMENT AT ERs.

ERs are way more expensive than occ med clinics, often exhibit abusive billing practices, don’t understand workers’ comp, and are where sick people go.

Other findings…

Non-COVID claims plummeted in the 27 study states during Q2 2020…

There was little difference in the type of injuries incurred during COVID’s worst times…

There’s a lot more in the 63 page report, but my main takeaway is this – I was pretty sure there would be treatment delays – and that was wrong.

Sure, logically my assumption made sense; people would avoid care because they were scared of being near COVID patients. And that was certainly true for most medical care; visits to doctors’ offices dropped 70-80%.

But that “logical” assumption didn’t take into account that when you get a nasty cut, or fall off a ladder, or break your leg, you need medical care.

What does this mean for you?

Question your assumptions.


Jul
22

The hospital war is ramping up.

The Biden administration is clamping down on hospital mergers and ramping up enforcement of surprise billing laws. 

Meanwhile, most hospitals are pretty much ignoring the requirement that they post prices. and are going to the mattresses to fight over mergers. (going to the mattresses is what Mafioso did back in the day during major turf battles)

I’ve written extensively about the impact of mergers on cost – it goes up, a lot – and quality – no evidence that it improves. But this isn’t just about hospitals, it is about the entire healthcare system and where it is headed.

Hospitals accounted for $1.2 TRILLION in spending back in 2018

Price is the reason healthcare is so damn expensive here compared to other developed countries; and price is driven more and more by hospitals. Pricing power is how hospitals and health systems generate ever margins, pricing power is what they get when hospitals merge and reduce competition in markets.

This from Cooper and Gaynor:

A number of studies have examined individual hospital mergers and found price increases of greater than 20% (e.g., Town and Vistnes 2001, Krishnan 2001, Vita and Sacher 2001, Gaynor and Vogt 2003, Capps et al. 2003, Capps and Dranove 2004, Dafny 2009, Thompson 2011, Tenn 2011, Gowrisankaran et al. 2015).

The FTC has conducted a series of merger retrospectives. These analyses have found price increases of 20% to 50% (Haas-Wilson and Garmon 2011, Tenn 2011, Thompson 2011).

There has also been work analyzing “cross-market mergers” of hospitals that are not geographically proximate competitors (Dafny, Ho, and Lee 2019, Lewis and Pflum 2017). These studies have observed cross-market merger effects that raised prices between 10% and 17%.

That’s how Tenet reported record profits last quarter, it’s why Michigan’s two largest systems are merging.

The merger thing has gone on so long that 4 out of 5 hospital market areas are “highly consolidated” – meaning the locally-dominant health systems have pricing power, and can use that to dictate prices to payers of all kinds. Mergers peaked several years ago – not because they are losing popularity, but rather because there just aren’t that many merger targets any more.

Because hospitals thrive on profitable services, we’re seeing cutbacks in less-profitable lines, cutbacks that are limiting the availability of services especially in rural and under-served areas. 

What does this mean for you?

We have got to get control of the hospital beast before it eats us alive.


Jul
20

Transparency in drug pricing

One of the top issues in work comp pharmacy – heck in all pharmacy – is transparency.

More than half of the 27 respondents to our latest Survey pf pharmacy management in workers’ comp want more transparency, while several others “need more transparency as I don’t feel comfortable not knowing if pricing is fair.”

The question is – what exactly is “transparency?

Is it the customer knowing what the PBM paid for the drug?

What about rebates?

Is it knowing what the pharmacy “charged” the PBM for that drug (which may or may not be what was paid)?

What about MAC pricing (Maximum Allowable Cost), where the PBM fixes the price it pays for a type of drug, say ibuprofen 800 mg, at a flat rate regardless of the drug manufacturer’s AWP price (there are lots of companies making ibuprofen 800mg)?

Net is “transparency” isn’t quite transparent.

What does this mean for you?

If you are evaluating PBMs, make very sure you understand exactly how they define transparency.  The best way to compare is to have them reprice specific drugs from the same pharmacy dispensed on the same day.

 


Jul
16

What’s the end game for Injured Workers’ Pharmacy?

IWP has been a pain in the butt for work comp payers for years. The company’s business model is predicated on getting prescribing doctors and claimant attorneys to have their patients/clients get their meds from IWP.

There are a bunch of potential issues with this, including:

  • there’s no opportunity for the payer to prevent an inappropriate or even dangerous script;
  • clinical management may be significantly compromised;
  • prices can much higher than a similar medication at a retail drug store; and
  • IWP’s billing creates huge headaches for adjusters, clinical managers, bill processors.

While IWP has claimed it manages the clinical aspects of drugs, it also paid $11 million to settle charges filed in Massachusetts ; Attorney General Maura Healey said:

“They  [IWP] dispensed thousands of prescriptions for dangerous drugs, including opioids like fentanyl, with a shocking lack of regard for whether those prescriptions were legitimate,”

WorkCompCentral’s William Rabb wrote an excellent summary of the MA case here;  Rabb noted IWP allegedly “paid referral fees to doctors, claimants’ attorneys and others in exchange for the names of injured workers who were candidates for pain medication…” [I also mentioned this here.]

Just last month, Business Insurance reported Bridgewater, Massachusetts-based Keches Law Group P.C.:

admitted in a consent judgment filed in Suffolk Superior Court that it referred about 800 of its clients and potential clients to Injured Workers Pharmacy LLC to fill prescriptions in exchange for about $90,000,

Keches allegedly entered into two agreements with IWP in which the pharmacy paid for the firm to participate in an X1 racing event and a yacht outing, and picked up the $24,000 tab for a holiday lunch in exchange for referrals, according to court documents.

A Louisiana case involving a $13,111 bill submitted by IWP provided other insights into IWP; according to the article in WorkCompCentral an attorney for IWP’s opponent “said claimants attorneys like to use OWP because they know it will inflate drug prices, thus increasing the value of medical benefits and, as a result, their own fees, which are 20% of benefits awarded.”

While some payers in some states have successfully challenged IWP’s demands for payment, overall the company has more often than not gotten paid for scripts it claims were dispensed to claimants – and in some cases won legal judgments to that effect.

At some point its owner will want to sell and move on. The question is, who will buy it?

I don’t see a PBM buying IWP; the PBM’s clients would likely not be pleased, unless the PBM promised to reform things.

But – and its a really big BUT – if the PBM, or any other buyer for that matter, substantially changed IWP’s business model to make it more “payer friendly” that may well reduce IWP’s cash flow and profits. IWP’s owners’ expectations for a sale price would be based on IWP’s earnings – earnings that may well suffer if the business model changes.

Then there’s the company’s legal history; investors hate potential future legal problems almost as much as a business model that isn’t sustainable [not saying IWP’s isn’t, but not if a PBM buys it]. Given the most recent legal situation was just last month, any buyer is going to be very very careful.

Most PE firms look to exit and make 3+ times their original investment. That looks to be a very heavy lift. Of course, IWP could change its business model to be more payer friendly and a bit less…enthusiastic about compensating docs and attorneys. But any move like this would take a lot of time, require extremely careful planning and execution, and is not guaranteed to preserve profits.

What’s weird about this is CEO Michael Gavin was a good friend, someone I liked, admired and respected. I haven’t spoken with Michael in years…it would be awkward at best.

What does this mean for you?

Be wary of business models that work until they don’t.


Jul
14

Latest data on WC drug spend, opioids, generics and PBM ratings

27 payers were kind enough to participate in this year’s Annual Survey of Prescription Drug Management in Workers’ Compensation.  I’m working thru the data now…here are a few highlights. (The Survey falls under CompPharma, a workers’ comp pharmacy consultancy; as always, responses are confidential and not shared with anyone or any entity)

Overall, pretty darn positive (but premature as some data is still coming in) results…

Opioids

Across all 27 respondents, opioids accounted for 18.7% of drug spend, a drop of half a point over the last 2 years.  That’s good news indeed…but there are caveats which we will get into in a future post.

One thing to note – there was a good bit of concern last year that the COVID thing might/would increase opioid usage; that didn’t happen. Again, good news.

Drug spend 

Overall drug spend decreased 12.3% from 2020 to 2021; about half of the respondents attributed the drop at least in part to fewer claims. In turn, most tied the drop in claim count to COVID.

Over the last decade, work comp pharmacy costs have dropped 9 out of the ten years.

Generics

Generic drugs accounted for 89.3% of all scripts, with generic efficiency ( the percentage of all drugs dispensed as generics that could have been generics) averaging just under 98%.

Again, an improvement over 2018’s 87% generic fill percentage.

PBM ratings

Once again respondents rated myMatrixx as the top PBM with 3.7 out of a possible 5 points, with market-share leader Optum trailing by a half-point. Mitchell is tied with Optum, while Coventry’s First Script lags another half-point behind. (Mitchell recently acquired Coventry)

Again, data is preliminary and subject to change.

More to come; as always a big thank you to the respondents who will each received a detailed copy of the Survey report; a public version will also be prepared and available at no cost to all.

Note – myMatrixx is an HSA consulting client; myMatrixx was not involved in conducting the Survey.


Jul
12

I haven’t seen any proof that it isn’t…and, well, if one believes the Left is a secret cabal of demons chasing kids, it sure looks like it could be.

Two very interesting data points.

First, residents of counties that voted for Trump are significantly less likely to have been vaccinated.

Same holds true for states…

Second, almost all recent COVID-related deaths are among folks who aren’t vaccinated; fully-vaccinated people account for less than one out of a hundred COVID-related fatalities.

And, the ones who stand to gain if more Trump voters die from COVID are Democrats and Leftists.

Of course this is utter nonsense, but no less nonsensical than accusing Hillary Clinton of leading a child-sex ring headquartered in a pizza restaurant.

What does this mean for you?

Satire has lost its impact.


Joe Paduda is the principal of Health Strategy Associates

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A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.

 

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