Friday, January 23, 2015

Crossing The Line

Earlier this month I wrote about crossing the line - the "premises line."

The Hartford, the workers' compensation carrier for defense contractor JT3 on Edwards Airforce Base, lost an appeal before the 2nd District Court of Appeals, which concluded that the undisputed facts in Schultz v. WCAB, No. B255678, demonstrated that "the premises line rule, rather than the going and coming rule, applies" to the the case of Craig Schultz.

Schultz was severely injured on the base en route to his actual office when he had a diabetic attack and lost control of his vehicle.

The court found:

1) It was undisputed that he and other employees of JT3 would perform work at multiple locations on the base.

2) The base "is a secure location," and JT3 controlled Schultz’s access to the base since it was responsible for getting him a security pass.

3) It was undisputed that Schultz's crash happened one mile inside the North Gate of the base, which meant his accident "occurred on JT3’s premises, and not while Schultz was commuting."

4) "[R]egardless of his means of travel to Building No. 1440, Schultz would have been on the secure premises of Edwards owing only to his status as a JT3 employee."

The Hartford is asking for a rehearing on the case (the WorkCompCentral story notes that the request does not indicate whether it is The Hartford, or JT3 requesting the rehearing, but there is no motivation for JT3 to do so - I'm secure in stating it's The Hartford, and if I'm wrong then please correct me).

At the California Applicants' Attorneys Association Winter Convention yesterday in San Diego, I heard story after story of issues dealing with insurance company claims departments, less about third party administrators acting on behalf of self-insured employers and even less about self-insured/self-administered employers.

There's an inverse relationship in claims management between employer control and claim outcome: the more removed the employer from the claim, the more contentious the relationship is with the claimant.

The insurance contract, supported by state law, essentially takes claim control away from the insured employer, leaving in general claim management subject solely to the financial motivation of the insurance carrier, which in turn is a factor of the carrier's primary duty to its shareholders: profit.

Someone recently opined in a response to one of my blog posts that an insurance company is in the business of managing risk for a profit. Part of managing risk is getting someone else to pay.

The Schultz case is a classic example, because Schultz' medical bills likely are sizable, let alone the disability tab. So The Hartford's continued attempts to defer or shift liability is understandable: the company and its attorneys are merely doing their job to minimize expense and maximize profit.

I get it.

That doesn't make it right.

I've said before that there is an inherent conflict in workers' compensation (and in many insurance settings, but seems to be more acute in work comp) - the business realities of making money collide with the social responsibility of taking care of the claim.

There are distinct roles for each cast of characters in the work comp scheme.

Insurance companies collect money in the way of premiums. Those premiums finance the carrier's operations, and a bit of it is set aside to finance the claims that are presented. Anything left over at the end of the fiscal measuring period is returned to shareholders in the form of dividends, and sometimes to employers depending on the carrier's structure and state laws.

The employer pays the premiums, and passes that cost along to the consumer in the price of its goods or services.

The government is supposed to make sure that everyone does their job.

I know this is a gross simplification of the scheme, but when you strip away all of the wall decorations, workers' compensation really is that simple.

We can talk all day long about mistrust, about communication, about equity, fairness, return to work, etc. ad nauseum. None of that really matters.

The Hartford is doing what a big corporation is going to do in its own interests. That's understandable. It's not doing anything wrong in terms of the law, or with regard to its shareholders.

But the conflict with social responsibility probably means that Schultz, the subject of all this activity, hasn't been in a good place in life since his accident.

We need some form of social protection in place for the people that produce the goods and services we consume - it's a critical component to a modern, healthy economy.

But maybe the way we have gone about it for the past 100 years no longer is adequate. Perhaps there are too many alternatives to which liability can be deflected or deferred. Perhaps the management of work injury risk in the modern economy needs to be examined in light of all of these alternatives.

Neither the injured worker, nor the insurance company, should have to think or worry about whether or not one had crossed the premises line.

Thursday, January 22, 2015

In San Diego

The weather for San Diego tomorrow through the weekend is forecast to persuade nearly everyone from attending the Annual California Applicants' Attorneys Association Winter Conference today through Sunday:



Of course I'll take my bicycle - after all San Diego is where I got started cycling in college, so it's almost a homecoming for me, pedaling Mission Boulevard out to La Jolla and up Pacific Coast Highway.

I am on a panel presentation at the CAAA conference. Fortunately my panel is really late in the afternoon so I can enjoy some of that great weather on two wheels.

The flip side is that the panel is the last presentation on Friday, starting at 5:05 p.m. and ending into my cocktail hour at 6:20. But I think that attendees will remain awake for the "Great Debate" because not only are we going to tackle some very interesting, timely issues, but the panel is a first, I believe, for CAAA with employer and defense representation.

On the panel with me are:
  • Christine Bouma, a member of the California Commission on Health Safety and Workers' Compensation;
  • Dan Bagan, a member of the California Commission on Health Safety and Workers' Compensation;
  • Jeremy Merz, a Policy Advocate for the California Chamber of Commerce;
  • Jamie Berenson, a partner in the applicant law firm of Glauber/Berenson; and
  • Barry Pearlman, founding partner in the defense law firm of Pearlman, Borska & Wax
The session will be moderated by Adam Dombchik, partner of the applicant law firm Gordon, Edelstein, Krepack, Grant, Felton & Goldstein, LLP

Of course you know that we'll be debating SB 863 and whether or not that landmark reform bill is meeting expectations, the impact on various affected groups including the primary stakeholders of employers and injured workers, and what we would do differently if we were the work comp czars.

All one need do to get my perspective is what you're doing now - read my blog. You know that in my opinion, so far, SB 863 has not delivered on its promises to insured employers.

Self insured employers, however, seem to have reaped great benefit. Nearly two-thirds of SB 863 "reformed" self insurance to make it easier to comply and maintain, and the reports I'm hearing so far is that self-insureds are very happy with those provisions.

But the story is different for other segments.

Injured workers got a pay increase, but even more red tape getting medical treatment.

Physicians and other medical vendors thus far are encountering an equal amount of red tape, and the anecdotal evidence is that the physicians who really do good work are exiting, leaving room for the more profit minded docs for whom the Hippocratic Oath was merely a recitation.

More money is going into cost containment services, or at least more of it is being reported as diverted to those services.

There are still many provisions of the bill that are still pending regulatory implementation - but the changes instituted by SB 863 were so broad and vast that it stretched the resources of the Division of Workers' Compensation despite an increase in funding and staffing.

Copy services, interpreters, and injured workers with decreased earnings still don't know what the final word is on elements that affect them, impinging cash flows.

Vendors that relied on the old system of filing liens to preserve reimbursement claims have had to come up with alternative methods of collections - and this has greatly reduced the expense of adjudicating those claims.

Employer rates have still gone up, and so have premiums. Carriers are still making money and the California market remains near a quarter of the entire nation's written premium.

It's easy to say that SB 863 hasn't delivered on its promises - promises that should have saved the California system a half billion dollars in the first year but didn't.

It's also easy to say that we still need to wait and see, as participants adjust to Independent Medical Review and other provisions that shocked the system.

And what if I were czar? What would I do?

1. Return to 1992 and the Minimum Rate Law - I think that Open Rating was the worst thing that could have ever been invoked on the California work comp insurance market. 

2. Restructure Audit Unit regulations so the Unit can actually fine and collect from carriers and Third Party Administrators that fail to meet standards; right now the Audit Unit is laughably impotent.

There you have it.

Come to the session so you can hear what the other 5 on the panel have to say. Or just read WorkCompCentral and/or this blog tomorrow morning (and Monday too).

Wednesday, January 21, 2015

Pharmaceutical Conundrum

Drugs and workers' compensation seem to go together.

And it seems, generally not for the purpose of ensuring the injured worker gets better.

2 stories in WorkCompCentral this morning highlight the creep of prescriptions into work comp and demonstrate how these become issues later down the road.

First, the Federal Drug Administration has been studying whether to reclassify marijuana out of the current Schedule 1 classification. The FDA has been looking at this since 2013.

Doing so would essentially be an admission by that administration that there are some legitimate medical and therapeutical value to pot.

Though New Mexico courts have ruled, twice now, that workers' compensation insurance companies must pay for medicinal marijuana as part of their medical liability, other states have not gone that far, and most payers are not authorizing payment for pot because it is still a Schedule 1 drug.

And the state trend to legalize marijuana, both for medicinal and recreational use, continues, exacerbating the friction between the federal law, state law, and medical research (which, for the most part sanctifies marijuana for very limited medical purposes, and generally no conditions that are typically the provence of workers' compensation cases).

States are also encouraged by the probability of increased tax revenue from pot, looking at pioneer Colorado's tax income as evidence. That state saw $45 million in pot tax revenue as of the third quarter in 2014 according to the Washington Post - revenue that otherwise would not be realized at all when the drug was solely under ground.

Some observers say that the introduction of marijuana into the work comp system as a recognized treatment option may affect the employment of injured workers because employers are going to be reticent to have pot users return to work to, for instance, operate machinery, until they can demonstrate lack of THC in their system.
Bowzer confronts the Conundrum

Of course, the likelihood is that the folks that are using pot now are probably working with it in their systems now - employers just don't know it for sure even though they may suspect it.

Combine the marijuana issue with physician dispensing compound medications, and we have a new, powerful trend to deal with.

The practice of medicine is, after stripping away the Hippocratic Oath, after all a business, which means there's a profit motive.

There are a few in the medical field for whom "In God We Trust" is more compelling than "Do No Harm." But these few disgrace the rest of the profession, and provoke undue burden on doctors who take The Oath seriously.

The Workers Compensation Research Institute issued a report the past week that physician dispensers had found a way around price controls adopted by both Illinois and California: The doctors dispense drugs in unusual dosages, such as 7.5 mg, which allows repackagers to adopt a unique National Drug Code number instead of using the NDC assigned by the drugs' original manufacturers.

WCRI found that physicians were dispensing a 7.5 mg strength formulation of the muscle relaxant cyclobenzaprine, a 150 mg extended release version of the painkiller tramadol, and a generic formulation of Vicodin containing 2.5 mg of hydrocodone and 325 mg of acetaminophen. Because there had been no corresponding increase in those novel dosages dispensed by pharmacies, WCRI concluded, "it is likely that financial incentives drove some physicians to choose the strength for their patients."

What WorkCompCentral reporters found was that the FDA database shows just 19 suppliers of the drug formulations highlighted in the WCRI report. Seven of them provided all three of the formulations, three that supply hydrocodone and cyclobenzaprine, five that only provide cyclobenzaprine and one that only provides hydrocodone.

Several of the companies had been fined or warned by the federal government for engaging in unsafe practices, while another paid $12 million to resolve allegations that it paid kickbacks to doctors to prescribe its products.

One company highlighted in the story markets itself an industry leader in "prepackaged pharmaceuticals." It offers physicians drug-dispensing software that will fill clinics with "healthy patients and healthy profits."

So while states are going to tackle with physician dispensed compound drugs, and just may eliminate all physician dispensing (which in my opinion is the only way to deal with removing the inherent conflict of interest, except in emergency or special circumstances), the new "mole" will arise: legitimization of marijuana and a whole new revenue stream.

Tuesday, January 20, 2015

Communication Effort

Coventry Workers’ Compensation Services published a white paper this month that makes a completely obvious recommendation that nearly no one will follow: increase communication with the injured worker.

The conclusion of the paper, that simply increasing the level of communication between injured workers and claims managers and doctors can help claimants recover more quickly and fully, is, frankly, a no brainer. All one need do is go talk to an injured worker or three who have been through the process to make that determination.

“Trust is intimately related to belief. If the employee does not trust the employer, it means that the employee disbelieves the information that comes from the human resources department, the (adjuster) and quite possibly the doctors,” the white paper reads. “This lack of belief is based on a gut feeling that the source of the information is either lying or incompetent.”

Where have we read that before? Perhaps this blog!

The Coventry paper, though stating the obvious, is at least a reminder to the people in this industry that their most basic job is to communicate: with the injured worker, and with each other. Unfortunately nearly no one is actually trained to communicate.

Talk to someone who has been through the workers' compensation claims process and you will find out that while you, as a professional, THINK you are communicating, the reality is that you probably aren't - at least not at the level to stave off mistrust.

And it's mistrust that drives poor outcomes and increased expense in the system.

At each stage of the process, more often than not, there is a failure to communicate.
What we got here is... failure to communicate.

But it's not for wanting; it's because we're not understanding what the communication needs are.

Coventry's paper does make some general suggestions - frankly all the same propositions that are repeated over and over and over again like a meditation mantra. These go a long way, but are not what is really needed.

What injured workers REALLY need to know is, what is the next step, what the choices are if any, WHO will be contacting them and why, etc. In other words, managing expectations is probably the primary job in the work injury communication process.

We can all feel empathy, and we can all try to smooth over the bumps in the process, but when it comes down to the fundamentals, what really matters is understanding the fears, which are generated by the unknown, and then eliminating as much as possible those unknowns.

Sure, the adjuster is trained to contact the injured worker immediately as part of the three point contact process when a claim is received. Sure, the employer is encouraged to "touch" the injured worker to let him or her know that they matter. And the physicians try, with the limited time for which they are paid, to have a positive talk with the patient.

All of that misses the opportunity to provide the injured worker with the information needed to establish trust.

Because what happens after the claims adjuster "talks to" the injured worker a stack of papers arrives in the mail with dire warnings about time limits that may affect receipt of benefits (though you don't need a lawyer on your claim!).

And then someone shows up at the door step with a brief case full of papers to take the injured workers' statement with documentation that may call into question credibility.

Then the doctor may refer the injured worker to another doctor that the insurance company doesn't want to pay - which is not communicated to the injured worker until AFTER the appointment...

We could go on and on about the what, when, who, how, and why of communication.

But it won't matter. Because communication requires effort - a lot of effort - to be effective. And the effort to engage in this style of communication, i.e. listening, isn't rewarded.

There's a post going around Facebook recently that reads, "The biggest communication problem is that we do not listen to understand. We listen to reply."

That's what workers' compensation does - we listen, but we do so to reply rather than understand.

That's what drives claim costs and interferes with positive outcomes.

Monday, January 19, 2015

Unfair and Inequitable


Rating a permanent disability in the California system prior to SB 863 included a function known as the Diminished Future Earnings Capacity modifier.

The DFEC element in the rating string was meant to compensate for disparity in pre-injury income, and the affect a disability has on the earning capacity post injury.

It's a noble sentiment and is based on research that demonstrated significant disparities in the earnings of workers of various occupations.

The problem with the DFEC is that it is another element of the California workers' compensation system that opens up debate, argument, disagreement, and ultimately litigation.

And we know from many studies that litigation is a huge cost driver, directly and indirectly.

Which is why SB 863 eliminated that portion of the rating string and substituted a flat modifier of 1.3 to all ratings regardless of occupation and alleged impact of disability on a worker in that category.

So while the First District Court of Appeals for California is finally going to render a decision in Contra Costa County v. WCAB (Dahl), No. A141046, having assigned responsive dates for the Workers' Compensation Appeals Board to deliver the case record, the case itself will have very limited application.

Doreen Dahl suffered a cumulative trauma industrial injury to her neck and shoulder in 2005, while working for Contra Costa County as a medical records technician.

Based on the agreed medical examiner's evaluation of Dahl's whole-person impairment and the 2005 Permanent Disability Rating Schedule, the Workers' Compensation Judge issued Dahl a 59% permanent disability rating.

The WCJ rejected Dahl's argument that her permanent disability should have been awarded at a higher rate because her decreased future earning capacity was greater than that reflected in the rating schedule.
59% rating

Dahl based her argument on a 1983 California Supreme Court case called LeBoeuf v. WCAB.

In LeBoeuf, the California Supreme Court allowed a worker to establish a permanent total disability based on vocational rehabilitation testimony showing his injury effectively rendered him unable to compete for jobs in the open labor market.

The WCJ ruled that LeBoeuf was inapplicable to Dahl.

Following the 1st DCA's 2011 decision in Ogilvie v. City and County of San Francisco, the WCJ concluded that an injured worker could not rebut the rating schedule's diminished future earnings capacity adjustment through vocational rehabilitation testimony unless her injury caused a total loss of future earning capacity and a 100% permanent disability.

The WCAB in a panel decision reversed the WCJ.
79% rating

"Ogilvie does not preclude a finding of permanent disability that takes into account the injury's impairment of rehabilitation and its effect upon the worker's (decreased future earning capacity)," Commissioner Frank M. Brass wrote in his decision for the panel.

After the case was sent back to the trial level, the WCJ determined that Dahl had a 79% permanent disability, based on her vocational rehabilitation expert's testimony that Dahl had suffered a loss of future earnings that was greater than what was reflected by the PDRS.

A WCAB panel upheld Miller's decision last January. Contra Costa County petitioned for judicial review last February.

And that's the reason why DFEC was eliminated from the PDRS by SB 863.

Because this case is representative of another friction point in the workers' compensation process - a delay on the case of untold years. Dahl's injury was in 2005, and the court may finally hear arguments some 10 years later, on whether Dahl is entitled to a few more thousand dollars. Maybe the court will issue an opinion within a year.

Maybe.

I'm all for trying as hard a possible to make a system fair and equitable.

But there are limitations built into the workers' compensation system; it can not be everything for everybody.

And there lies the issue: by design workers' compensation is NOT fair and equitable. At best, the indemnity portion of workers' compensation, whether temporary disability or permanent disability, is a temporary financial relief.

Any attempt to make the indemnity portion of work comp actually meet some compensatory goal of returning someone to a certain financial level will fail because the variables are too great.

California is famously a liberal state. The citizens, for the most part, want fair treatment of everyone. In the California Nirvana, everyone should have an equal chance and be treated with equanimity.

The real world doesn't work that way however - and frankly I think it's time to stop the fairy tale that workers' compensation should be fair and equitable, because it isn't and never will be.

There are minimums and maximums to indemnity. There are limitations on medical procedures. There are restrictions on benefits.

Are there devastating disabilities? Yep. Are some worse than others? Yep. Is each case different? Yep.

Does each case deserve to be treated differently? Not necessarily.

The concept of workers' compensation is that everyone compromises. That dialogue has been repeated over and over and over again - everyone gives up something for security.

The employer's security is supposed to be protection from civil lawsuits. The employee's security is supposed to be the promise of prompt medical care and an allowance to stave off financial ruin.

What happens when a system tries to be fair and equitable is exactly what happens to Doreen Dahl - a case that lingers for ten years while other people argue about a small component to the overall scheme because the variables make it worth while to do so.

The financial difference to Dahl is about $100,000 in gross indemnity, plus a "life pension" of about $73.00 per week.

The financial incentive to argue this small point of the rating string demonstrates how friction gets created out of "fair and equitable."

I don't know what Dahl's age was at the time of injury (the panel opinion from which the appeal was taken doesn't provide that detail) but let's assume that she was 50 years old for ease of calculation. And let's also assume that she was permanent and stationary 2 years post injury after her temporary disability indemnity ran out.

That brings us to 2007, and 52 years old. At that time Dahl would have an average life expectancy based on US life tables of about 30 years - to age 82.

Let's also assume a 5% return on investment rate.

The gross value of the 79% PD award, inclusive of the present value of the life pension, is about $215,000.

Fifty nine percent doesn't merit a life pension, so the gross value of that is about $80,000.

$80,000 invested at 5% in 2007 will generate about $38,000 in interest. And if none of that money is touched the gross amount today would be almost $120,000. If left alone for 12 years it grows to over $130,000, and if left alone for 15 years it grows to nearly $170,000. For 30 years the value grows to about $350,000.

And Dahl gets to move on with her life in 2007.

Let's assume that the court renders its decision this year, 2015 - that means according the life tables there's 22 years left in Dahl's life expectancy. $225,000 at 5% for 22 years generates a gross return of about $630,000.

And Dahl gets to move on with her life in 2015, with potentially twice the financial gain.

It's a trade off, for sure. I'm not saying whether one result is better than the other. What I am saying is that in an attempt to make a system "fair and equitable" the system itself became unfair and inequitable by implanting points of friction - and Dahl may be better off financially because she got an attorney than someone who didn't.

A truly fair and equitable system would not create incentives for people to get lawyers to maximize an award. A truly fair and equitable system would eliminate the difference having an attorney on a case could make.

The DFEC component was eliminated by SB 863, so that point of contention is gone. But there are many others.

Complexity begets litigation because an attorney can make a difference. And as we can see, sometimes a big difference.

The cost to the system is delay and uncertainty.

In order for workers' compensation to be fair and equitable, it has to be less fair and less equitable...

Friday, January 16, 2015

CAVU

CAVU - ceiling and visibility unlimited.

To a pilot that means two things: unbelievable views and probably a little bit of turbulence.

CAVU means the winds aloft are strong enough to push away any clouds and the moisture that forms them.

In California we get more than our fair share of CAVU days, particularly in the fall and winter when Santana winds originate from high pressure in the Great Basin to bring cold dry air to the region.

Yesterday was CAVU. Climbing off of runway 7, where there's not a lot of room to gain altitude before hitting Camarillo's airspace, I was seeing climb rates of 1,300 to 1,500 feet per minute on the Vertical Speed Indicator - a very healthy rate of climb in a Bonanza A36 with a normally aspirated Continental IO 520 engine! I was well clear of Camarillo Class Delta altitude before I reached the edge of that airspace.

We did a little tail wagging getting to cruise altitude, but nothing out of the ordinary. And cruising through the San Fernando Valley at 5,500 feet was nonchalant.

On the Coastal Route through Los Angeles Class Bravo space, between Santa Monica and Los Angeles airports, though, we had a shake or two. Nothing violent, and certainly predictable given the atmospheric conditions, but enough to wake you up!

The view, however, was astounding. All of the Los Angeles Basin was clear and detailed. And it stretch all the way to the mountains where a white, snow capped Mt. Baldy accentuated the scene.
CAVU yesterday
Once out of Bravo and heading south again the Mexican border and Tijuana was clearly visible, war ships were lined up to get into Long Beach Harbor, and a bit more aerial dancing was experienced passing by the Santa Ana Mountains.

And yesterday the Workers' Compensation Insurance Rating Bureau of California issued a study that, again, reports claims frequency is growing and that Southern California and Greater Los Angeles is the geographic anomaly that is the culprit.

The rest of the nation, and Northern California, continue to see frequency rates (how many work injury claims are filed per 1,000 employees) go down.

California went up zero point nine percent. The rest of the nation (National Council on Compensation Insurance statistics) went down two percent.

The report states that 16.3 out of every 1,000 workers in California filed a workers’ compensation claim in the first nine months of 2014. When frequency is measured per $100 million of exposure, the Los Angeles area saw a 3% increase last year (27.48), while the Bay Area posted a 1.8% reduction in frequency and the rest of the state’s rate fell by 0.6% (13.78).

The theories abound about why this is: more low wage workers in the LA area, economic growth, young workers coming into employment, etc.

Some of the blame is being hurled at the type of claims - cumulative trauma - and those types of claims involve more litigation which means they're more expensive.

From 2007-2010, 72% of cumulative trauma applicants sought legal representation, but from 2012-2013, 80% did.

In 2012, claims payers denied all body parts in 57% of all cumulative trauma claims, compared with a 66% denial rate the next year. In 2012, 37% of those claims were filed post-termination, but in 2013 that number rose to 41%.

The WCIRB’s research shows that higher-risk industries, such as construction and agriculture, have seen marked increases in claim frequency since 2010, while industries like professional services and finance have seen reduced frequency. The bureau estimated that industry mix drove up frequency 1.1% in 2013.

And those who have been on the job for less than two years, where the greatest employment gains have been seen in the economic recovery from the Great Recession, made up 49% of claims in the 2014 accident year, up from 41% in 2010. During the same timeframe, injured workers who had been on the job for two to six years fell from 30% of claims to 21%.

Am I concerned? The statistics might be alarming, but then again, maybe not. In the end, the employer pays the insurance bill, and it's a matter of whether the risk of doing business in Los Angeles is worth the benefit of ceiling and visibility unlimited conditions. The employer community will tell us that eventually; whether or not this leads to some "reform" down the road will depend on how long those conditions last.

There's been a lot of press about Southern California claims ruining the rest of the state's statistics, and when there's enough noise then people get anxious and seek to remedy a perceived problem that is not understood.

We've been through this before many times with psychiatric claims, with physician dispensing, with medical legal mills, etc. In each instance a reform was put through only to open up other, more creative, ways to seek benefits, and other, more creative, ways to deny claims.

At the end of the day, though, we don't really know why, and ergo, don't know how.

In other words, CAVU in workers' compensation means Claims And Vindications Unknown. And like aviation there's turbulence in clear air that you can't see but you know is there, somewhere.

So let's take a moment, stay calm, and chive on (acknowledgement to clothing company theChivery for their trademark phrase). No more reforms please. Not yet.

Thursday, January 15, 2015

Formulary Coming To You

A panel presentation at the the upcoming Workers' Compensation Research Institute's 31st Annual Issues & Research Conference (March 5–6, 2015) to be held in Boston, MA will review physician dispensing of pharmaceuticals and the impact on costs (of course) and health outcomes for patients.

This is a timely topic as the trend of prescription drug formularies is spreading across the nation, and part of the debate is whether or not doctors should be fulfilling prescriptions from their offices.

Regulators in Tennessee, Arkansas and Oklahoma are writing proposals to establish a formulary based on the Official Disability Guidelines. The Maine Workers’ Compensation Board is forming a task force to consider creating a formulary, while California regulators have wrestled with the idea for years.

Formularies are already in place in Texas, Washington and Ohio. Oklahoma is operating a formulary under emergency rules that expire in September.

Formularies' primary purpose is to restrict the prescription of opioids and compounded drugs and that should lead to reductions in the number of injured workers receiving those drugs. Texas' experience seems to support that goal.

Texas adopted a closed formulary in 2011. Since then, the number of opioid prescriptions for injured workers in the state has dropped 10%, according to the Workers’ Compensation Research Institute. Prescriptions for opioids not on the formulary list have dropped 60%, while scripts for all drugs not in the formulary have fallen 70%. Overall prescription drug costs for injured workers have declined 15%.

A study by WCRI published last year postulated that a Texas-like formulary would likely result in savings for other states. The institute’s researchers found that if physicians in other states behaved the same as Texas doctors, a Texas-like formulary would cut prescription drug costs 29% in New York, 25% in New Jersey, 18% in Florida, 16% in Illinois and 14% in California.

The California Workers’ Compensation Institute in its own study last year found that a Texas-like formulary would cut prescription drug costs by $102 million to $541 million annually in California.

Alex Swedlow, president of the California Workers' Compensation Institute, will be part of a panel on physician dispensing at the conference.

Certainly the insurance community likes the idea of "closed formularies."
This chart has nothing to do with formularies - I just thought it was a neat infographic...

The American Insurance Association supports formularies, and is lobbying legislatures to adopt Texas' process, which is based on The Official Disability Guidelines published by the Work Loss Data Institute.

Still, the handful of states that are considering formularies doesn't mean that this is a sweeping trend.

As Maine Workers’ Compensation Board Executive Director Paul Sighinolfi told WorkCompCentral, “The real focus is to minimize pain as much as possible and ... bring [injured workers] back to a functioning level, and I think that's what our focus is really going to be,” citing concerns that insurance companies and other claims payers will use formularies solely as a means to cut expenses.

The WCRI study found that claimants in Texas increased the use of alternative options such as non-steroidal anti-inflammatory drugs and physical therapy since the state’s formulary went into effect in 2011, effectively shifting medical spending away from opioids and toward those treatments.

Regulators in California have the same concern.

California Department of Industrial Relations Director Christine Baker told state legislators in 2013 that the department was considering a formulary as part of a package meant to fight the over-prescription of opioids. The department is still looking at the issue.

"We are doing due diligence in terms of researching the benefits both from an appropriate medical care standpoint, because that's really important that injured workers get appropriate medical care and there are formularies that can do that, (and) we are also looking at it from a (cost-benefit analysis) standpoint," she told WorkCompCentral Wednesday.

States in general like to watch what happens with an innovator for a couple of years before considering adoption of something new. Then there seems to be a tidal wave that sweeps across jurisdictions in an exponential way.

My best guess is that formularies are more likely than not to be a part of your workers' compensation system within 10 years - particularly if California adopts one because state legislators and regulators like to see how a very large system adapts so anticipated issues can be planned.

The WCRI conference will also include presentations on the Affordable Care Act, fee schedules, and lessons from a couple of decades of "reforms" reflecting the last couple of trends across the nation.