If the requirement that every individual have health insurance is overturned by the Supreme Court, workers' comp costs will increase over the near term and get worse from there.

If the mandate sticks, costs will likely moderate somewhat, then increase at a lower rate. Here's why.

First, it may not be why you think; work comp costs won't come down because people with health insurance are less likely to file WC claims (the theory being those without insurance are more likely to try and get comp to cover a non-occupational injury). In fact, studies indicate those with insurance are less likely to file a comp claim, although the correlation appears to be statistical and not causal. For a more in-depth discussion, click here. [opens pdf]

Healthier claimants

What may well be the most significant long-term impact of reform is the likelihood that workers will be healthier, their underlying conditions and comorbidities will be addressed by their health plan, and therefore comp payers won't have to pay for treatment of those conditions in order to resolve the work injury. Think diabetes and surgery...

This is particularly true for smaller employers in states such as Texas and Florida which have large proportions of working-age people with no health insurance; work comp insurers focused on small businsses may well find their outlook looking rosy under reform.

In addition, several studies (here and here) indicates those with health insurance tend to be healthier than those without. Healthier people heal faster, more good news for work comp.

Degenerative conditions

For some diagnoses, identifying the cause of the injury is becoming increasingly problematic. It is often difficult for a physician to determine the 'cause' of back pain or dysfunction; it may, or may not be wholly or partially related to a work injury and different physicians often reach different conclusions about the cause of injury. While reform won't clear up those medical mysteries overnight, it will reduce the need for comp payers to pay for what are clearly non-work-related conditions.

Less need to cost shift

Workers comp is the most profitable payer for many facilities; margins are much higher for comp than for Medicaid (which pays below cost) and Medicare (which pays right around cost). When more people have health insurance, there will be less need to shift cost to workers comp to cover the expense of providing care to the uninsured. Sure, the Accountable Care Act will not cover everyone, but it will cover about two-thirds of those currently without health insurance. And most of those newly-covered folks will be the employed (and dependents thereof).

There's a complicating factor - or rather multiple factors that make the real picture a bit too muddy to clearly project the impact of reform on cost shifting. For example, Medicaid will expand significantly (in fact it already has). While that's good because providers are now getting paid something for some portion of the care they use to do for free, it may well be that they deliver a lot more care to a lot more people - all at below-breakeven rates.

With that said, it remains to be seen if the mandate stays, goes, or, if it goes, takes the entire Accountable Care Act with it.

What does this mean for you?

Regardless, it is clear that the more people there are with health insurance coverage, the better it is for workers comp payers. And if the mandate goes away, the percentage of workers with health insurance will undoubtedly be less than if it doesn't.

Posted by Joe Paduda at 1:11 PM | Link to this post | Comments (0)

While many workers comp insurers and TPAs are lamenting the problems of overuse and abuse of opioids, some are actually implementing solutions. While no one can claim they've got this solved, there are some promising approaches.

One of the more sophisticated and comprehensive opioid programs was recently implemented by the Accident Fund and their subsidiaries. It involves early identification of opioids dispensed to claimants, rapid notification of adjusters, and peer-to-peer intervention in claims identified as high priority.

The program grew out of a research collaboration with the Occupational Medicine Division at Johns Hopkins School of Medicine that linked pharmacy data to claims data; the findings revealed a strong link between opioid use and extended disability duration. Equally important, the research team, led by the Accident Fund's Jeffrey Austin White, determined the number of scripts for opioids "were increasing at a rate of 10% per year across the enterprise since 2006 and dominated the top 5 list of most used drugs by 2008."

Accident Fund Holdings Inc. (the parent company of the Accident Fund, CompWest, United Heartland, and Third Coast Underwriters) is using an internally-developed software application called "Care Analytics" to monitor incoming pharmacy records in "near real-time", looking for triggers and patterns that indicate a potential for abuse. When a potentially problematic transaction is flagged, the appropriate adjuster is immediately notified. Depending on the specifics of the claim and the transaction, a nurse case manager and/or the Medical Director may also be notified.

There's a good deal of peer-to-peer intervention in the program, and to date its been quite successful. According to Paul Kauffman, RN and director of Accident' Fund's medical management programs, "Over 70% of our providers have been willing to adjust treatment protocols and monitor the use of opioids by our injured workers...over five percent [of claimants identified] have been weaned from narcotics and are already back to work."

By no means is this an easy process, and it can be complicated by workers comp regulations and laws that don't promote effective approaches to addressing opioid abuse and addiction in workers comp. This has to change; the Hopkins-Accident Fund research indicated that workers prescribed even one opioid had average total claims costs 4 to 8 times greater than claimants with similar claims who didn't get opioids.

I should note that I've been working with Accident Fund and their affiliated companies for some time, however I was only tangentially involved in this program. That said, it is obvious that one of the key factors driving the success of this program has been strong and consistent support from senior management, in this case Chief Claims Officer Pat Walsh.

What does this mean for you?

Solving the opioid problem is absolutely realistic, but it requires strong senior management support, careful use of intelligent analytics, and coordination across multiple areas within the payer.

Posted by Joe Paduda at 8:40 AM | Link to this post | Comments (0)

Coventry Health announced their full-year 2011 results this morning; I'd have to sum it up as quite positive, driven primarily by big Medicaid and Medicare revenue increases. There's no question where management is focused - with CMS programs accounting for half of the company's revenue and essentially all of their growth, management's focus on the call was almost exclusively on governmental programs with some discussion of the impact of health reform.

Most interesting was the continuation of lower medical utilization and lower medical costs into Q4, especially in the inpatient admissions and days across both Medicare and commercial populations. Chairman Alan Wise did note there's been a slight uptick in physician utilization, but this was outweighed by the decline in facility services.

Geographically, it is increasingly clear Coventry is focusing on their core Midwest states, with expansions in governmental programs, deals with provider systems, and specifically successful efforts to increase their Medicaid business in Kansas, Missouri, Nebraska, and (not strictly speaking a midwest state) Kentucky.

The commercial business is not faring as well, with essentially flat membership for the year; premium increases resulted in an 8% uptick in revenue. The work comp sector is not growing much - more on that below.

Coventry's utilization trend was consistent with other payers, yet their overall cost trend is a couple points higher than other health plans at high single digits. This appears to be unit cost driven (no surprise), although CFO Randy Giles did state health reform increased trend by up to 200 basis points specifically from eliminating deductibles and copays for preventive services. Seems like an awful lot to me; I can't see how preventive care deductibles and copays could possibly amount to 200 basis points in losses.

Coventry re-negotiated their Medco pharmacy contract (for their non-workers comp business) and got better terms and an extension, with Medicare through 2015 and commercial a year longer.

On the workers comp front, the loss of a large customer dropped revenue 3%; word is that was the ESIS contract. Management did note that the $1.1 billion in management services/fee revenue is higher margin and provides cash for investment and acquisition activities.

Charles Boorady did ask the only question about workers comp, asking what drove the loss of the large customer - Mike Barr [sp?]is the new manager of the overall services business so Wise deferred to him. WC is an area they're looking to grow, as it is unregulated revenue it is a 'great place to be'. Barr said they lost their second largest group due to a competitive environment, noting there was "nothing specific with WC that created the issue, as a line it runs well." [paraphrase] He went on to note Coventry is centralizing some operations to consolidate especially in areas where there's no network.

Management said that while Coventry lost the overall contract, some employers (likely administered by ESIS) are looking to come back and work directly with Coventry, and Coventry is working on those opportunities. In commenting on the work comp sector, Wise said it is a stable and slightly growing business, it is an accident based business and in tough environment it has continued to add revenue slightly and ebitda a bit. In response to a question, Barr said they lost the business on price.

What are the key takeaways?

Expect Coventry's work comp sector to push hard to increase revenue from existing and add new customers.

Posted by Joe Paduda at 8:09 AM | Link to this post | Comments (0)

Word is the recent flurry of acquisitions and mergers in the work comp services industry isn't likely to taper off any time soon.

Genex is reportedly up for sale, Injured Workers Pharmacy has seemingly been in play for months, a major managed care firm may be in play, and there is significant activity on the part of investment firms looking to buy into the PBM space.

This comes on the heels of MSC's purchase of complex care firm Total Medical Solutions, York's purchase of JI Companies, and the sale of Paradigm Services to an investment firm (one without much experience in workers comp), all taking place just last month, not to mention 2011, a very active year for work comp deals.

Among the likely acquirers are investment firms eager to jump into what looks like a business ripe for consolidation and automation, as well as current players seeking to add assets and services to their portfolio of companies/products/services. Expect ISG Holdings to be especially active; with Stratacare and Bunch already onboard they are positioned well to expand into related service lines.

The spate of activity may slow for a bit as sellers seek higher valuations than the current 7x EBITDA (+/-) that is around average these days, this typically happens as owners see other deals done, want to get in on the gravy train, and believe their company offspring is more valuable than others they've seen sold. But, with the threat of an increase to capital gains coming at the end of this year, there's a big incentive for owners to cash out now and save big dollars in tax expense.

What does this mean for you?

Perhaps a bit of distraction, which may open up opportunities for vendors/service companies who can stay focused on their customers' needs.

Posted by Joe Paduda at 9:04 AM | Link to this post | Comments (0)

Friday's news that the nation added over a quarter-million private-sector jobs in January [opens pdf] was good news indeed for health plans, workers comp insurers, service companies. But January wasn't the only bright spot; the report indicated a lot more jobs were added last quarter than previously thought, and the unemployment rate fell by two-tenths of a point.

Since August, the unemployment rate has fallen steadily from 9.1 percent to 8.3 percent, a significant - and encouraging - improvement.

Here are a few key indicators.

- employment in architecture and engineering grew by 7000 jobs, a likely harbinger of future growth in construction and manufacturing.

- construction employment increased by 21,000 after a jump of 31,000 in December

- manufacturing jumped by a whopping 50,000 jobs, much of it in durable goods such as automobiles

- November and December employment was higher than previously reported by 60,000 jobs

So, what are the implications for health plans and work comp payers and service providers?

More workers = more health plan members. We likely won't see much growth for another couple of months, as many employers have extended their waiting periods for eligibility. However, the steady growth in jobs at small and large employers means organic premium growth with almost no added cost-of-sale.

Occupational injury rates akafrequency will trend up for some months as new employees tend to get injured more often than their more experienced, thoroughly-trained, and knowledgeable co-workers. This means more claims for work comp insurers, and more work for the industries servicing work comp - think physical therapy, imaging, bill review and repricing, networks. Pharmacy will also tick up, but the PBMs are somewhat isolated from frequency trends by long time claimants high utilization.

Most encouraging is the overall increase in employment over the last 22 months.

Posted by Joe Paduda at 8:06 AM | Link to this post | Comments (0)

UPDATE - In response to a query, MedRisk informed me that my savings figure was misstated.

MedRisk reduced SWIF's medical payout by $28.9 million below fee schedule from January 2009 to December 2012; the earlier post (below) indicated the reduction was $21.5 million below fee schedule. My original figure was obtained from Wagner's report, which may not have included all months used by MedRisk.

Also, MedRisk informed me their total reduction below fee schedule was $21.1 million NET after MedRisk's fees.

Original Post is below

Earlier this week, Pennsylvania's Auditor General released a report entitled "Auditor General Jack Wagner Finds Poor Management Of State Workers' Insurance Fund Contracts, Costing Taxpayers."

Kind of a bold title, especially because that's NOT what Auditor General Jack Wagner's audit found.

I applaud the Auditor for initiating the audit, and it certainly seems like they dedicated a substantial amount of resources to the project. I've had a chance to read the Auditor General's SWIF Audit report, and have gotten emails and calls from several people with different views. In point of fact, there appears to be some confusion about what the report says, and doesn't say, along with a recommendation/finding that reflects a somewhat alarming lack of understanding about the workers compensation services business. In addition, the press release bears little resemblance to the report itself.

Briefly, there is quite a bit of discussion regarding SWIF processes and contractual issues, much of which is thoroughly and competently addressed in SWIF's response to the Audit report. There is no allegation that MedRisk engaged in inappropriate behavior or operated unethically, in fact MedRisk saved SWIF $21.5 million below fee schedule, thereby dramatically reducing employers' and taxpayers' costs.

Before I jump in, I'd note that MedRisk, the contractor providing bill review and network management services under contract to SWIF, is a consulting client. I called MedRisk to ask for their comments; they declined, except to note they had not been involved in the audit. This is surprising; the audit report has 7 findings related to MedRisk-SWIF involving contractual changes, systems programming, processing flows, file imports, bill review practices and the like, and at no time was MedRisk asked for their input.

Couple key issues. The Auditor General's press release buried the lead, focusing on contractor MedRisk and SWIF's management of the contractor, while giving short shrift to a much more costly issue, SWIF's alleged mismanagement of a costly IT project. I'm puzzled by this; why did the press release focus first - and primarily - on the bill processing issue and not lead with the $70 million problem - the allegation that SWIF failed to adequately oversee a technology project?

I'd note that the audit report does the same; the IT project is the last issue on their list, with the first 7 points devoted to alleged issues with the SWIF-MedRisk contract.

Second key issue before we get into specifics. The Auditor opines that MedRisk should not process PPO bills; the report's author seems to feel this is somehow unethical or inappropriate. The Auditor states that MedRisk should not have been allowed to do this and excoriates SWIF for allowing the practice, as if somehow this practice enables fraudulent behavior.

Here's what the press release says:

"SWIF created a conflict of interest and the potential for fraud by allowing MedRisk to process its own in-network bills and by failing to ensure that MedRisk does not intentionally delay the processing of those bills."

This is nonsensical. There is NO incentive for MR to delay processing.

Why would MedRisk delay processing of its own network bills? To intentionally anger MedRisk's contracted providers? Cause them to submit more bills, thereby increasing administrative costs (which could not be passed on to SWIF)? Get those frustrated providers to call SWIF and complain? Get the benefit of float at today's generous interest rates?

Again, I'm puzzled. Network managers - in work comp and many other lines of coverage - routinely process, reprice, review, and pay bills from their network providers. This is de facto common practice in the Pharmacy Benefit Management sector of Medicare, group, and workers comp and is quite common in the imaging, durable medical equipment, physical medicine, home health care, and transportation/translation areas within workers comp. There are literally dozens of companies operating this way throughout the workers comp industry, at private insurers, TPAs, state funds, and self-administered employers and governmental entities alike. I've never heard of this practice characterized as dangerous, potentially risky, or even unusual.

Now that we've covered those issues, we can delve into a couple specifics. Point One - SWIF paid about $2,500,000 in penalties for late payments to medical providers. Some cite this as a MedRisk issue, however MedRisk was not responsible for paying the vast majority of bills; SWIF was.

Which leads to Point Two. The contract obligated MedRisk to turn around complete clean bills in an average of ten days. The audit indicated some 90,000 bills, or about 24% of the total, took more than ten days to process. However, the auditor's press release didn't distinguish between the contractual commitment (average) vs the bills that took more than ten days (outliers). This is unfortunate, as it lead some to think MedRisk failed to comply with that contractual commitment. If 76% of bills were processed in ten days or fewer, it appears extremely likely MedRisk hit the target most of the time (we'd need to know the specific contract language and see data specific to those targets to be entirely sure).

Most of the bills processed in more than ten days hit at the very beginning of the contract implementation.

I find it curious that the Auditor makes up his own standard for timeliness, uses that made-up standard to impugn both SWIF and MedRisk, then in a later section blames SWIF for not holding MedRisk to actual, real, written contractual standards.

Next, MedRisk was obligated to deliver savings - below the state's Fee Schedule - with specific targets for trauma bills and all other bills. The audit report noted MedRisk missed their target in one category - hospital trauma bills - by $800,000. A fair but at best a minor point; the fact is MedRisk saved SWIF $21.5 million dollars, after accounting for the shortfall in trauma savings. Here's how Pennsylvania Secretary of Labor and Industry Julia Hearthway put it in her response to the Auditor:

"the contract with MedRisk has produced net savings of $21.5 million over the life of the contract...Based on the savings realized through the contract, SWIF would have been irresponsible to terminate the agreement based only on the trauma savings."

What was NOT addressed in the Auditor's press release was the fact that MedRisk hit or bettered its savings targets in the "all other" category, saving SWIF $21.5 million below fee schedule. And, the savings from the trauma, PT, pharmacy, imaging, and every other sector were rolled up and transferred to SWIF before any payments were made to MedRisk - if MedRisk didn't hit the total target, they got paid nothing for savings.

The auditor also found fault with SWIF, asserting SWIF changed what it required MedRisk to do after the contract was awarded. A couple of changes may have led to reduced costs for MedRisk while others undoubtedly increased MedRisk's cost and exposure to penalties. It is common for vendors and customers to find better, cheaper, and faster way to do things after they sit down and start working through the details. Moreover, any relationship should evolve as both partners see ways to improve processes, strip out unnecessary steps, and increase performance. Don't know if this is the case in the SWIF - MedRisk example, but it is in most business relationships; as most readers know quite well, it's just not possible to write a contract that covers every detail, especially when you're structuring a relationship and business processes between two organizations new to each other where one is implementing a new computer system.

So.

- We have a vendor that delivers savings of $21,500,000 to SWIF's employers and taxpayers.

- This same vendor uses an operational model that is standard throughout the industry, processes most bills in fewer days than required, and achieves its turn around time target the vast majority of the time.

- Yet the auditor's report suggests that the contract should not have been renewed, and an entire new vendor selection process initiated.

I'd also note that SWIF's response to the Audit addresses each of the issues, and bears reading (see pages 68 - 77), especially if one is looking for a balanced view. In sum, yes, there have been issues; anyone ever involved in a project like this would expect that. But no, there's no illicit or inappropriate behavior, actions, intentions, or results.

And I just can't understand why the Auditors never asked MedRisk for their input or feedback.

Posted by Joe Paduda at 3:38 PM | Link to this post | Comments (0)

From the Rocky Mountains comes this edition of Health Wonk Review; the always-erudite Louise Norris.

Delightfully illustrated and well written, this edition deserves your vote.

Posted by Joe Paduda at 6:31 AM | Link to this post

An open letter to the press, business community and people of North Dakota:

The authors of this letter are journalists, columnists, bloggers and content publishers for the workers' compensation industry across the United States. We are a politically and professionally diverse group. We do not agree on everything, yet find ourselves of one opinion on a highly critical matter. We are competitors who are now colleagues for a common cause; to bring light to a serious injustice being committed within your state.
The prosecution of Charles (Sandy) Blunt was, in our view, an outrageous and almost farcical event. It is, in the final analysis, a travesty that has damaged the national view of your state, hampered the operation of a State agency, and ruined the life of a good man wholly undeserving of such results.

Sandy Blunt was Director of North Dakota's Workforce Safety & Insurance from May of 2004 until December of 2007. He was, as you are likely aware, prosecuted by state authorities for "misspending government funds". Specifically, he was charged and convicted on two counts:
1) During his almost 4 year tenure his agency spent approximately $11,000 on employee incentive items, including flowers, trinkets, balloons, decorations and beverages for Workforce Safety and Insurance employee meetings, and on gift certificates and cards in small denominations for restaurants, stores and movie theaters. Blunt personally approved some of these expenditures. Others were made by managers as part of daily operations under his watch. Not a dime went into an employee's pocket, nor did Blunt personally benefit from any expenditure.

2) His agency paid $8,000 to an employee, David Spencer, for sick pay when he was not apparently sick, and it also failed to collect $7,000 from Spencer when he left prior to the end of his employment agreement. The $7000 was for moving expenses incurred that prosecutors felt Spencer owed the state. Blunt's position was that the agency was not entitled to collect these funds, since Spencer's departure was not voluntary.
All told, the state prosecuted Sandy Blunt, and he is now a convicted felon for "misspending" $26,000 of government money.

No one has ever alleged that Blunt personally benefited from any of these expenditures. Blunt was acting like other capable, ethical North Dakota executives ‐ in the best interest of customers and of the mission of his employer. In our industry it is considered a best practice to provide employees and supervisors with incentives. It is not frivolous, it's necessary, and what every employer should do.

The first of these two charges would be, to many people, laughable if it were not for the damaging consequences associated with them. The notion that buying inexpensive incentive items for your employees could result in a felony conviction is simply stunning. This would not be elevated to a criminal status in most states in the nation. The fact that it is in North Dakota should have a chilling effect on businesses looking to move there.

The second and more serious charge, involving the sick pay and moving expenses of employee Spencer, has been fatally undermined by the revelation that the prosecutor in the matter, Cynthia Feland, withheld critical evidence from the defense - evidence that largely clears Blunt in this area. A disciplinary panel for the North Dakota Supreme Court has found on November 7, 2011 that:

"Cynthia M. Feland did not disclose to Michael Hoffman, defense attorney for Charles Blunt, the Wahl memo, and other documents which were evidence or information known to the prosecutor that tended to negate the guilt of the accused or mitigate the offense."
Withholding of evidence by prosecutors is one of the most serious acts of prosecutorial misconduct in North Dakota and all other states. In recognition of this, the panel recommended Ms Feland's license to practice law be suspended. We urge that you read the entire report of the panel, including the penalties the board recommended be imposed on Ms. Feland. For the report, go here.

Had the prosecutor not withheld evidence, in all likelihood the case would never have come to trial, and the reputation of Blunt and the WSI would be free of taint. The evidence in question shows that WSI's auditor's own findings backed Blunt's position on payments related with Spencer. However, those findings were not made available to the defense, and the prosecutor was found to have allowed testimony to be given at the trial that directly conflicted with information she had. As we indicated, Feland, now a judge in your state, has been recommended for suspension and a fine over these findings.
Yet Sandy Blunt remains a convicted felon. His crime? Buying balloons, trinkets and $5 gift cards - for his employees, not for himself. For that, Blunt, who is married with two children, has had to spend half a decade, and untold thousands of dollars trying to clear his name.

Some of us have known Sandy for quite a while. Some have come to know him while learning of his situation. Others of us have never met Sandy, but recognize the tenuous nature of his treatment. Collectively we speak to thousands within our industry every day. Our opinions have been clear; this situation needs the light of truth shone brightly upon it. The time and resources expended prosecuting a man on such questionable grounds should be more closely examined, by the business community, workers compensation professionals and the media in North Dakota.

Sandy Blunt is a good and decent man. He deserves better. So, it would seem, do the people of North Dakota.

Peter Rousmaniere
Consultant & Writer
WorkingImmigrants.com

Robert Wilson
President & CEO
WorkersCompensation.com

Joseph Paduda
Principal, Health Strategy Assoc, LLC
ManagedCareMatters.com

Rebecca Shafer
LowerWC.com

David DePaolo
President & CEO
workcompcentral.com

Tom Lynch
Founder & President
Lynch, Ryan & Associates, Inc.

Jon Coppelman
Senior Vice President
Lynch, Ryan & Associates, Inc.

Julie Ferguson
Consultant & Editor
WorkersCompInsider.com

Henry Stern, LUTCF, CBC
InsureBlog.net

Sandy Blunt related articles from these authors:
Blunting Political Vindictiveness
What's wrong with Sandy Blunt.
Is justice on the horizon in North Dakota?
Let Me Be Blunt: Sandy Got Screwed in North Dakota
The Square Wheels of Justice in the Peoples Republic of North Dakota

Posted by Joe Paduda at 6:05 AM | Link to this post

A hospital bill for $44 million showed up in Alex Rodriguez' mailbox a couple weeks back.

Although Alex is a resident of New York, he's not "the" A-Rod, but even the A-Rod who wears pinstripes to work at Yankee Stadium would have been hard-pressed to come up with the $44,000,000 ostensibly owed to Bronx Lebanon Hospital.

Of course, it turned out to be a "billing error"...but I'm probably not the only one who didn't think the amount wasn't theoretically possible.

After all, hospitals have been charging patients more and more for the same procedures over the years; the average charge submitted to CMS for Medicare zoomed from around $500 in 1996 to almost $2000 in 2008.

While I haven't heard of a real bill hitting eight figures, I'm sure there've been some that have come close; seven figure bills are much more common than they used to be, with most of my clients getting one or more a year. Carol Gentry of HealthNews Florida reported last year that the estate of a penniless woman was billed $9.2 million by Tampa General Hospital...this case was a mess, complicated by a nasty family dispute, Medicare rules, and legal proceedings.

Here's hoping you aren't the first to get a "real" $44 million bill...

Posted by Joe Paduda at 1:33 PM | Link to this post | Comments (2)

To date, Automated Healthcare Solutions and other companies owned by their principals have donated over $3 million to various politicians, campaigns, and political organizations. Automated Healthcare Solutions and their sister companies are heavily involved in physician dispensing to workers comp patients in Florida and other states.

The actual number is $3,224,076 since 2002, coming from dozens of companies that are affiliated with or managed by AHCS' principals, with big dollar donations to committees backing current Senate President, MIke Haridopolous and House Speaker Dean Cannon.

Haridopolous' and Cannon's committees each received at least $350,000.

The research was done by the Florida Independent's Virginia Chamlee, who details the various companies and political donations in her piece on Automated Healthcare Solutions. Chamlee's piece is the first to provide a full picture of the political donations of AHCS' principals Zimmerman and Glass, and the $3.2 million total shows clearly just how important Florida is to dispensing companies and their affiliates.

If you are thinking this isn't a big deal - you aren't thinking. Physician dispensing increases Florida workers comp premiums by 2.5%. That added cost will disappear if Senate bill 668 passes and is signed into law, but the contributions and political muscle of AHCS and their allies are making that look increasingly doubtful.
SB668 is out of one committee in the Senate, but things get tougher from here. There's no question Sen Haridopolous has gotten an earful from those who are profiting from physician dispensing, and as the Senate's boss, he has a lot of influence.

Now he needs to hear from those who are paying the tab.

Send Sen Haridopolous an email, copy Sen Alan Hays, the Senator who is backing the bill to limit the cost of physician dispensed drugs - not ban physician dispensing, but limit the cost to what you'd pay for the same drug at a retail pharmacy.

and send me a copy too.

Tell Sen Haridopolous:

- Florida's employers can't afford to enrich a select few who get most of the dollars from physician dispensing.

- If he's serious about getting the State's economy back on track, he'll help employers cut their costs

- if he's serious about helping taxpayers, he'll stop backing physician dispensing which adds to their bills while forcing schools, police and fire departments to lay off workers to pay the inflated bills of physician dispensers.

What does this mean for you?

Time to get active, or don't complain when SB668 is defeated and your costs go up even more.

Posted by Joe Paduda at 7:17 AM | Link to this post | Comments (3)

Over the last ten years, more than two thousand claimants have died as a result of drugs received as part of their "treatment' for their occupational injury or illness.

That's the conclusion reached by Peter Rousmaniere in his latest column at Risk and Insurance - and if anything, his estimate is on the low side. This isn't a criticism, as it is evident Peter is doing his best to avoid sensationalizing an issue that needs no exaggeration.

Peter bases his estimate on several different data sources, including a just-published article authored by Gary Franklin, MD, Medical Director of Washington's state workers comp fund. By my calculation, both Peter and Dr Franklin's estimates seem low.

A back-of-the-envelope calculation arrives at this figure - there were about 1750 narcotic-related workers comp deaths across the country in 2009 alone.

I base that figure on two data points.

1. Washington's research - about 35 claimant deaths in 2009 appeared narcotics-related.

2. Washington has about 2 percent of the nation's population.

Washington State has addressed the issue, and their solution has had a remarkable impact. This from the article by Franklin et al:

"By the third quarter 2009, there was a substantial decline in the mean daily long-acting opioid prescription dose among workers' compensation claimants in WA, followed by a dramatic fall in unintentional poisoning deaths related to prescription opioids in this population in 2010."

That's one state out of fifty.

What does this mean for you?

Identify doctors prescribing more than 120 morphine equivalents per day to claimants. Find out why, and if appropriate, take immediate steps to stop sending claimants to them.

Posted by Joe Paduda at 6:24 AM | Link to this post | Comments (2)

One of the most powerful firms in the physician dispensing business is sending hundreds of thousands of dollars to elected officials in Florida. [sub req] The donations, to individual politicians and their affiliated organizations, come as the Florida Senate is considering a bill that would limit reimbursement of physician-dispensed drugs to the cost of the underlying (non-repackaged) drug.

This morning Mike Whitely of WorkCompCentral reported Automated Healthcare Solutions "gave more than $32,500 to Florida state lawmakers and more than $500,000 to committees associated with conservative causes and candidates in 2011...", most of it in the last three months of 2011.

The timing is fortuitous, as Senate bill 668 was moving thru the legislative process last quarter, and is the subject of intense debate. Suffice it to say that passage of SB 688 would greatly reduce the income of companies in the physician dispensing/drug repackaging sector.

The physician dispensing bill made it out of one Senate Committee last week, albeit with a poorly-written and ill-advised amendment.

Writing in HealthNews Florida, Carol Gentry reported: "SB 668 survived its first committee in a 7 to 4 vote. But some senators who voted in favor said they may change their minds if answers to their questions aren't forthcoming by the time it gets to the Senate floor."

It's unknown if the flood of cash from AHCS will affect the votes of key Senators, or cause beneficiaries to use parliamentary procedures to block the bill. The forces allied in support of the bill include the Chamber of Commerce, most of the workers comp insurers, and many employers.

And, in an interview with Whitely, a spokesperson for AHCS said the company is not focusing on the issue, saying their donations are "not a means of affecting public policy".

Really. That's what she said. Evidently AHCS' half-million bucks - donated to key legislators with power over SB 688 - is not related to physician dispensing.

That being the case, I'm sure Florida's elected legislators will do the right thing, pass the bill, and thereby reduce Florida employers' work comp premiums by tens of millions of dollars.

What does this mean for you?

Yet another opportunity to watch the ugly, money-driven process that is politics at its worst.

Posted by Joe Paduda at 8:09 AM | Link to this post

Looks like the rumors are based in fact; case management/bill review vendor Genex is up for sale.

The "official" news came yesterday (thanks to a good friend for the tip); "The Wayne, Pennsylvania-based company has EBITDA of USD 40m, the source and the first industry banker said. Bank of America has been mandated for the sale process, according to the source familiar. The sale process is in the early stages, with no first round bid deadline yet set, a third industry banker said."

With top line revenues estimated at $390-$400 million, it's not a terrifically profitable entity, but then case management is not known as a big cash generator. They've made a couple acquisitions lately, with Intracorp by far the largest.

Looks like Genex' owner, Stone Point Capital, may be entering the divesting phase. Recall SPC also has ownership in Sedgwick and Stone River/Progressive Medical, although the latter property was only recently acquired. As CIGNA is also an owner, they could be pressuring Stone Point to sell Genex; pretty much every health plan is looking for capital to invest in preparing for 2014, and CIGNA would get a chunk of cash from a sale.

Timing is good - valuations are up, there's lots of activity and interest, and a couple of big-money folks are looking for roll-up and industry integration opportunities. Genex would be a pretty interesting cornerstone for such a venture.

What does this mean for you?

Hold on to that hat - this isn't going to be the last big deal we'll see this winter.

Posted by Joe Paduda at 7:13 AM | Link to this post

A couple days ago a shadowy equity "research" outfit that goes by the name Copperfield Research published what can only be described as a hatchet job, with CorVel the target.

I'm no fan of CorVel - their business model makes little sense, their pricing model for bill review/networks/ancillary savings appears designed to maximize their revenue, the quality of their services varies widely, and I've been generally unimpressed with their customer service and value proposition.

I'm even less enamored of the "research" and "analysis" done by Copperfield. This isn't a well-known research firm or trading outfit, I couldn't find anything definitive about Copperfield, what their business is, who works there, and why they publish "research". Others speculate Copperfield is the product of an individual engaged in short selling; making money when a stock price drops. I have no idea if that's the case, but that would help explain the CorVel research paper.

Whoever wrote the hatchet job quoted me extensively; that's why I find it necessary to speak out.

It is quite clear that Copperfield knows next to nothing about CorVel's workers comp business, or the work comp world in general, for that matter. Here are a few specific issues I have with their "report".

Copperfield cites the 2005 Broward County audit as an example of CorVel's problems - folks, that was seven years ago. Why did Copperfield resurrect that story? How does this support his claim that "Corvel operates in the gray area of legal and business practices?"

Copperfield raises the Silent PPO issue; CorVel's PPO, like every other PPO, probably has serious data issues and may publish inaccurate provider manuals as well. This isn't evidence of intentional fraud; as anyone who's ever been in the network business knows, the directory is obsolete the instant its published.

CorVel's bill review and related operation is cited as another example of possible malfeasance. Again, disagreement between bill repricers and providers is not exactly new news, and disagreements don't mean there's intentional fraud.

Copperfield can't understand how a work comp services company can grow while frequency declines. Boy, talk about a guy without a clue about comp. Severity is up, Copperfield, medical complexity is up, and many other services companies have also grown over the last decade - despite declines in frequency. Perhaps Copperfield's extensive research staff didn't find Sedgwick, MedRisk, PMSI, MSC, Express Scripts, Align Networks, York Claims, MHayes or any of the dozens of other companies, that have grown quite nicely over the last ten years.

He says "CorVel is paid based on the number of claims it manages and is often paid a percentage of the client's savings..." Well, not exactly. CorVel gets paid in a variety of ways for a variety of services; Copperfield's failure to delineate these various services and describe the associated pricing mechanisms shows a lack of attention to detail, or perhaps eagerness to avoid talking about issues that don't support his assertions.

Moreover, Copperfield's complete lack of professionalism is evident in his assertion that somehow CorVel's percentage of savings model is an outlier, unique and different. We all know that's far from reality. While I have voiced my objections to the model, the fact is it's all too common.

He also says no analysts are following the company - not true. There are any number of research reports on Corvel

Okay, those are the highlights. Now let me get snarky.

This guy just flat out can't write, yet he thinks he can. Here are a couple examples.

Discussing the Broward audit, he says it "succinctly details" information. Huh? That's an oxymoron, and a wrong one at that - the report has 211 pages...

Copperfield likens himself to perhaps the most attractive exposer of corporate malfeasance in recent history, saying "we feel a certain kinship to the Erin Brockovich's [sic] of the world..." I have no idea if Copperfield is the male equivalent but he certainly doesn't know the difference between the possessive and the plural.

In discussing the results of his(?) extensive research, Copperfield says "we have uncovered some alarming finding.[sic] There's that damn plural again...

If you really want a hoot, read his description of the work comp claims process on page 5. It is (unintentionally) hysterically wrong.

Finally, this knucklehead says "According to Joseph Paduda [that's me]...nurse case management is a low-margin." I know, I know, he just forgot to add "business." That's not acceptable for two reasons. One, if you're going to paraphrase or quote someone, get it right. Two, it shows a lack of attention to detail, an absence of care and thoroughness that may well extend beyond his inability to write.

What does this mean for you?

If Copperfield is selling short, he's already done well. And if you're reading his stuff and acting on it, good luck.

Posted by Joe Paduda at 6:58 AM | Link to this post | Comments (5)

I don't like these bills, and neither should you.

First, my perspective.

I'm a content provider and a copyright holder. I don't want anyone else taking my intellectual property without permission and/or compensation. This isn't just about MCM; I've also written a book (The Art of Sculling) that has been in print for twenty years, and while the revenue from that book is tiny, it is payment for my work and no one should be able to access that work without paying for it.

I get the movie producers', actors', artists, and musicians' perspective and agree with it.

The two bills currently before Congress are waaaaay too overreaching - sure they solve the problem of internet piracy. So would shutting down the internet. While SOPA/PIPA don't go that far, they do make innocent parties suffer for the acts of others.

Here's how this could affect me - and you, loyal reader.

Say someone posts a comment with a link to a copyrighted video, image, document, song; and the Feds get a complaint. Under SOPA/PIPA, they could legally shut down MCM immediately, and I'd have to spend tons of time and energy dealing with the issue before I could get MCM back up and running. That would harm me, and end your ability to access MCM.

Bob Wilson provides more insight:

"First, the government would have been able to force search engines to "delist" any website they suspected of these activities. The second would be to require ISP's (Internet Service Providers) to disable "Domain Name Service" to the suspected sites. The DNS service is essentially what allows the "domain name" that you are familiar with to work."

I get the intellectual property argument - I absolutely get it. But SOPA/PIPA are a heavy-handed, highly punitive, and poorly designed solution that would cause far more damage than necessary.

Sign the SOPA/PIPA petition, and let's stop this idiocy.

Posted by Joe Paduda at 7:23 AM | Link to this post