As reform rhetoric heats up in California, one area is creating battle lines - utilization review (UR).
Recently it was revealed by WorkCompCentral that there is no good data on UR. And it may be that there really isn't any way to get it, at least at this point in time with the current systems in place.
Regardless, business interests and insurance interests continue to support UR as a way to monitor and manage care which they say is necessary to protect injured workers from treatment requests that aren't supported by good medical or scientific evidence.
Those in opposition to UR, primarily the applicant's attorneys and injured worker lobbying groups, say that UR is used to deny necessary necessary treatment and to delay cases and/or put savings in the system onto the backs of injured workers.
Some UR companies do have some data, albeit incomplete - the reason the data is incomplete is because not all treatment requests are sent to UR, and those that are sent to UR aren't subject to follow up data so we don't know the true efficacy of UR approvals or denials. There's no way to make comparisons or see what the outcomes are.
In my view UR is a necessary component in workers' compensation. From my observations, most injured workers put way too much trust in the professionals managing their claims, be it physicians, attorneys, claims adjusters, whomever. Most injured workers do not take the time or have the expertise to research their conditions and make health choices on their own. They rely on professionals to steer them in the right direction.
This really is no different that what is found in the general health population - although trends do seem to be shifting now that most people use the Internet. Still, researching medical issues can be daunting for the everyday person and people in general put, in my opinion, way too much trust in professionals to make decisions for them.
When you really get down to it, the medical component of workers' compensation these days is just a more liberal managed care system. It is managed care to the extent that there are rules in place to direct how medical care is to be delivered. But it is more liberal than general health managed care because there is much flexibility in the rules regarding choice of care and outcomes control.
I'm a fan of managed care. I am a Kaiser Permanente member and our health plan is through Kaiser. The service is fantastic - I actually get into the exam room when scheduled, my records are on computer for instant reference and notation, pharmaceuticals and other prescriptions are handled instantly and seamlessly, and I get status on virtually everything as soon as it happens on the Kaiser website. I have the opportunity to see another physician if I don't like what my doc has to say or do.
I must admit though that it is rare for me to go to the doctor because I take care of myself - I ride my bicycle every day, I eat organic foods from the local farmer's market, my weight is under control, with the assistance of statins my generically high cholesterol is managed, and I try not to drink alcohol too much (I like good wine; hey, a man's got to have some vices!). I probably don't sleep enough though (got a blog to write every morning...).
Not all managed care is created equal though and not all patients are as interactive with their health issues as I am. I will also admit that I may not be a managed care fan if I were going through a medical supply entity that wasn't as organized, sophisticated and well run as Kaiser. It was only 20 years ago that "Kaiser" meant the worst care possible...
And of course there are failure points - that happens in any service supply business. In the medical world a failure in a service point has significantly higher negative impact on a patient's perception of service than in other worlds, perhaps because the service affects the patient in a most personal, and life threatening manner.
Not all UR is the same, just as not all managed care is the same.
So really the debate about UR is not whether it should or shouldn't be a part of the workers' compensation system. UR serves a good and useful purpose and should still be a part of the system.
The debate about UR in California is really about the meteoric rise in the cost of the service and the problem is that we don't know why (frequency or severity or both) the cost of the service has risen so dramatically in just the last five years.
Everyone has their theories - profiteering, conflicts of interest, increases in unsubstantiated treatment requests, etc. - but everyone is just guessing.
Someone will figure out how to study the efficacy and cost/benefits of UR. Until then, the debate on UR has no foundation and should not be a part of the reform discussion.
Friday, May 25, 2012
Thursday, May 24, 2012
Rx Testing the New Source for Regulation
The rapid rise in spending for drug testing over the past couple of years raises more questions than answers.
Yesterday the California Workers’ Compensation Institute (CWCI) released a report estimating that carriers and self-insured employers paid $98 million for drug testing in 2011, 192 times the $509,000 paid in 2004.
CWCI estimated total system costs for drug testing was $177.3 million over the past eight years, but $98.7 million of that was paid in 2011 and $51.4 million was paid in 2010. Spending on drug testing in 2011 accounted for about 2.5% of all system medical expenses that year.
Whats more, CWCI said that the average amount paid per date of service increased 315% to $147.55 in 2011 from $35.51 in 2004.
These results seem to point towards two trends that can be described using insurance vernacular: an increase in frequency (the amount of testing being done) and an increase in severity (the cost of each test).
Of course these are conclusions and what is driving both frequency and severity is an unknown, but there are calls for more regulation to provide guidance on when drug testing should take place and how much drug testing should cost.
Some will lay blame on testing labs because of evidence of impropriety, with allegations that drug testing labs have caught on to the opioid trend and are capitalizing on the situation.
In April, WorkCompCentral ran a story about drug testing labs accusing other labs of gaming the situation by inflating testing bills by up to 1500%, and by recoding or bundling services.
In addition labs and drug testing companies are alleged to provide doctors with marketing and promotional materials showing them how they can bill not just for a $20 point of care, but also for multiple office visits, patient consultations and preparing reports.
One possible contribution to the rise in drug testing frequency and severity in workers' compensation cases may be due to an increase in enforcement efforts against labs that are intentionally overbilling by the Centers for Medicare and Medicaid Services.
Prosecutors in Massachusetts announced in April that Calloway Laboratories agreed to pay $20 million to settle state charges that it defrauded Medicaid with a kickback scheme and excessive urine tests.
In February, the U.S. Attorney’s Office in Michigan announced that three labs in Troy, Mich., agreed to pay $6 million for improperly billing about $900 worth of urine drug tests for patients regardless of what the physician ordered.
In May 2011, Quest Diagnostics paid $241 million to settle a whistleblower lawsuit accusing it of overcharging Medi-Cal and paying kickbacks to doctors, hospitals and clinics that referred patients to its labs.
And in November 2010, Ameritox Ltd. agreed to pay $16.3 million to settle allegations that it made cash payments to physicians in exchange for referrals for drug-testing services.
So perhaps the increase in workers' compensation drug testing is the result of a shift by the labs from the Medicare system to the more fractured, less onerous, state workers' compensation systems with the myriad of 50 different sets of rules and regulations making it easier to hide.
Perhaps part of this meteoric rise in testing costs is due to pure profiteering. There certainly is evidence of this.
In March Dr. Gerald Pearlman accused his former employer, Accatur Diagnostics, of performing unnecessary tests to inflate bills and submitting invoices to payers using codes in the Official Medical Fee Schedule that are supposed to be used only by the laboratories that perform the tests, resulting in bills for tests that were between $1,000 and $3,000 when the cost of the testing was only $70.
I guess that this trend should be expected. The substantial increase in opioid cases around the country, in and out of workers' compensation systems, would result in increased testing. Capitalism being what it is, there is a natural tendency to take advantage of the situation while it still exists.
One thing is for certain, this too shall pass and the next cost driving trend will take its place - we just don't know what that will be ... yet.
Yesterday the California Workers’ Compensation Institute (CWCI) released a report estimating that carriers and self-insured employers paid $98 million for drug testing in 2011, 192 times the $509,000 paid in 2004.
CWCI estimated total system costs for drug testing was $177.3 million over the past eight years, but $98.7 million of that was paid in 2011 and $51.4 million was paid in 2010. Spending on drug testing in 2011 accounted for about 2.5% of all system medical expenses that year.
Whats more, CWCI said that the average amount paid per date of service increased 315% to $147.55 in 2011 from $35.51 in 2004.
These results seem to point towards two trends that can be described using insurance vernacular: an increase in frequency (the amount of testing being done) and an increase in severity (the cost of each test).
Of course these are conclusions and what is driving both frequency and severity is an unknown, but there are calls for more regulation to provide guidance on when drug testing should take place and how much drug testing should cost.
Some will lay blame on testing labs because of evidence of impropriety, with allegations that drug testing labs have caught on to the opioid trend and are capitalizing on the situation.
In April, WorkCompCentral ran a story about drug testing labs accusing other labs of gaming the situation by inflating testing bills by up to 1500%, and by recoding or bundling services.
In addition labs and drug testing companies are alleged to provide doctors with marketing and promotional materials showing them how they can bill not just for a $20 point of care, but also for multiple office visits, patient consultations and preparing reports.
One possible contribution to the rise in drug testing frequency and severity in workers' compensation cases may be due to an increase in enforcement efforts against labs that are intentionally overbilling by the Centers for Medicare and Medicaid Services.
Prosecutors in Massachusetts announced in April that Calloway Laboratories agreed to pay $20 million to settle state charges that it defrauded Medicaid with a kickback scheme and excessive urine tests.
In February, the U.S. Attorney’s Office in Michigan announced that three labs in Troy, Mich., agreed to pay $6 million for improperly billing about $900 worth of urine drug tests for patients regardless of what the physician ordered.
In May 2011, Quest Diagnostics paid $241 million to settle a whistleblower lawsuit accusing it of overcharging Medi-Cal and paying kickbacks to doctors, hospitals and clinics that referred patients to its labs.
And in November 2010, Ameritox Ltd. agreed to pay $16.3 million to settle allegations that it made cash payments to physicians in exchange for referrals for drug-testing services.
So perhaps the increase in workers' compensation drug testing is the result of a shift by the labs from the Medicare system to the more fractured, less onerous, state workers' compensation systems with the myriad of 50 different sets of rules and regulations making it easier to hide.
Perhaps part of this meteoric rise in testing costs is due to pure profiteering. There certainly is evidence of this.
In March Dr. Gerald Pearlman accused his former employer, Accatur Diagnostics, of performing unnecessary tests to inflate bills and submitting invoices to payers using codes in the Official Medical Fee Schedule that are supposed to be used only by the laboratories that perform the tests, resulting in bills for tests that were between $1,000 and $3,000 when the cost of the testing was only $70.
I guess that this trend should be expected. The substantial increase in opioid cases around the country, in and out of workers' compensation systems, would result in increased testing. Capitalism being what it is, there is a natural tendency to take advantage of the situation while it still exists.
One thing is for certain, this too shall pass and the next cost driving trend will take its place - we just don't know what that will be ... yet.
In the meantime, prepare for increased regulation and rules adding yet more complexity and costs.
Wednesday, May 23, 2012
LA Bill Eliminating Liberal Construction is Bad Policy
"Disputes concerning the facts in workers' compensation cases shall not be given a broad, liberal construction in favor of either employees or employers; the laws pertaining to workers' compensation shall be construed in accordance with the basic principles of statutory construction and not in favor of either employer or employee."
This is the preamble to Louisiana Senate Bill 763 by Sen. Jack Donahue, R-Covington.
In addition, SB 763 states that the provisions of the workers' compensation law "are based on the mutual renunciation of legal rights and defenses by employers and employees alike; therefore, it is the specific intent of the Legislature that workers' compensation cases shall be decided on their merits."
The statement of legislative intent is, of course, since this is politics, a trade for an increase in some benefits for injured workers, increasing burial benefits by $1,000 to $8,500 and providing an earlier start to payment of lost wages – beginning two weeks after injury rather than six weeks..
But in my view this is a dangerous exchange and one that is not being given well thought out consideration by the employer community.
On its face employers might think that they are just righting 100 years of wrong - that workers' compensation laws are liberally construed in favor of the injured worker and unfairly penalize employers.
What happens when they are not liberally construed however leads to troublesome results for employers.
Missouri demonstrated that following a 2005 amendment that mandated courts to "strictly construe" the law. Consequently Missouri courts concluded that injured employees could sue coworkers for negligence, even if the injured worker received workers' compensation benefits, and that occupational diseases were not covered under the workers' compensation system thus opening up employers to civil liability for those claims.
The purpose of workers' compensation laws is to keep claims of work injury out of the civil courts and cap damages. This provides stability and predictability so that businesses can properly plan their budgets and can spread the risk of claims over a broad base.
The Louisiana Association of Business and Industry (LABI)urges support for the bill, stating on its website that the bill, "is a LABI-sponsored measure to eliminate some of the friction and excessive litigation from Louisiana’s workers compensation (WC) system. The bill (1) requires courts to apply the WC statutes according to their clear provisions and not in favor of one party over another, (2) establishes a procedure for resolving indemnity benefit calculation errors and disputes without resorting to court, (3) allows payors to avoid penalties and attorney fees by continuing benefits while disputing a claim, and (4) clarifies that a dispute over medical treatment cannot proceed before the medical director rules on such treatment pursuant to the medical treatment guidelines."
LABI urges, "If you want an improved and less costly WC system in Louisiana, please contact your representatives to urge their support for SB 763."
Jennifer Barber Valois, an attorney with the Barber Law Firm in Lafayette and a member of the Louisiana Association for Justice, told WorkCompCentral that the change is likely to increase litigation, require more workers’ compensation judges and create higher costs for the system, adding, “I think it’s bad for everyone.”
Seems to me that LABI is backwards on its vision in this case, and in contradiction to the organization's goal of ensuring the best interests of business in the state. SB 763 will do more harm to business than good. It is a shortsighted position by the business lobby to reverse the current interpretation of Louisiana's workers' compensation laws. Unintended consequences will certainly prevail and Louisiana business is not going to be happy.
I agree with Valois - SB 763 is bad for everyone except perhaps carriers in the state which will be able to deflect costs onto other systems and society in general which will not necessarily result in lower
SB 763 was approved by the House Committee on Labor and Industrial Relations Monday on an 8-6 vote and is ready for a vote by the full House.
This is the preamble to Louisiana Senate Bill 763 by Sen. Jack Donahue, R-Covington.
In addition, SB 763 states that the provisions of the workers' compensation law "are based on the mutual renunciation of legal rights and defenses by employers and employees alike; therefore, it is the specific intent of the Legislature that workers' compensation cases shall be decided on their merits."
The statement of legislative intent is, of course, since this is politics, a trade for an increase in some benefits for injured workers, increasing burial benefits by $1,000 to $8,500 and providing an earlier start to payment of lost wages – beginning two weeks after injury rather than six weeks..
But in my view this is a dangerous exchange and one that is not being given well thought out consideration by the employer community.
On its face employers might think that they are just righting 100 years of wrong - that workers' compensation laws are liberally construed in favor of the injured worker and unfairly penalize employers.
What happens when they are not liberally construed however leads to troublesome results for employers.
Missouri demonstrated that following a 2005 amendment that mandated courts to "strictly construe" the law. Consequently Missouri courts concluded that injured employees could sue coworkers for negligence, even if the injured worker received workers' compensation benefits, and that occupational diseases were not covered under the workers' compensation system thus opening up employers to civil liability for those claims.
The purpose of workers' compensation laws is to keep claims of work injury out of the civil courts and cap damages. This provides stability and predictability so that businesses can properly plan their budgets and can spread the risk of claims over a broad base.
The Louisiana Association of Business and Industry (LABI)urges support for the bill, stating on its website that the bill, "is a LABI-sponsored measure to eliminate some of the friction and excessive litigation from Louisiana’s workers compensation (WC) system. The bill (1) requires courts to apply the WC statutes according to their clear provisions and not in favor of one party over another, (2) establishes a procedure for resolving indemnity benefit calculation errors and disputes without resorting to court, (3) allows payors to avoid penalties and attorney fees by continuing benefits while disputing a claim, and (4) clarifies that a dispute over medical treatment cannot proceed before the medical director rules on such treatment pursuant to the medical treatment guidelines."
LABI urges, "If you want an improved and less costly WC system in Louisiana, please contact your representatives to urge their support for SB 763."
Jennifer Barber Valois, an attorney with the Barber Law Firm in Lafayette and a member of the Louisiana Association for Justice, told WorkCompCentral that the change is likely to increase litigation, require more workers’ compensation judges and create higher costs for the system, adding, “I think it’s bad for everyone.”
Seems to me that LABI is backwards on its vision in this case, and in contradiction to the organization's goal of ensuring the best interests of business in the state. SB 763 will do more harm to business than good. It is a shortsighted position by the business lobby to reverse the current interpretation of Louisiana's workers' compensation laws. Unintended consequences will certainly prevail and Louisiana business is not going to be happy.
I agree with Valois - SB 763 is bad for everyone except perhaps carriers in the state which will be able to deflect costs onto other systems and society in general which will not necessarily result in lower
SB 763 was approved by the House Committee on Labor and Industrial Relations Monday on an 8-6 vote and is ready for a vote by the full House.
Tuesday, May 22, 2012
Iowa Tax Case Should Bring Employer Jail Time
How do you deal with workers' compensation scofflaws? By busting them on tax issues.
But just seeking money in a civil tax action won't do the trick - jail time is necessary. That takes commitment of law enforcement. The question is whether law enforcement deems the evasion of workers' compensation obligations sufficiently criminal to seek justice.
But just seeking money in a civil tax action won't do the trick - jail time is necessary. That takes commitment of law enforcement. The question is whether law enforcement deems the evasion of workers' compensation obligations sufficiently criminal to seek justice.
In Iowa, James L. Watts, owner of Watts Trucking Service and numerous trash and waste-hauling companies that operate in the Midwest, owes more than $30 million in payroll taxes and has failed to pay more than 14 judgments since 2008 related to injured workers’ claims, according to court records and news reports.
Watts, 69, has ignored tax obligations and opened and closed numerous corporations over the past few decades as tax and workers' compensation issues emerged, court records and officials said. He has formed and run at least 23 different companies, many of which accrued the sizable employment and unemployment tax debt, according to federal prosecutors. Collection efforts have largely failed, officials told WorkCompCentral.
Watts is being sued by the Internal Revenue Service in Federal court. The complaint accuses Watts of "pyramiding" employment taxes by opening new companies to avoid tax obligations associated with existing companies and trying to "stymie" IRS collection efforts.
Until the IRS case Iowa officials had no idea of how egregious Watt's actions have been.
And Iowa has no method to provide for injured workers of uninsured employers, unlike most states, so the victims of Watt's maneuvering have no recourse.
Watts, 69, has ignored tax obligations and opened and closed numerous corporations over the past few decades as tax and workers' compensation issues emerged, court records and officials said. He has formed and run at least 23 different companies, many of which accrued the sizable employment and unemployment tax debt, according to federal prosecutors. Collection efforts have largely failed, officials told WorkCompCentral.
Watts is being sued by the Internal Revenue Service in Federal court. The complaint accuses Watts of "pyramiding" employment taxes by opening new companies to avoid tax obligations associated with existing companies and trying to "stymie" IRS collection efforts.
Until the IRS case Iowa officials had no idea of how egregious Watt's actions have been.
And Iowa has no method to provide for injured workers of uninsured employers, unlike most states, so the victims of Watt's maneuvering have no recourse.
According to state officials, Watt's is just one example of an extensive problem in the state - employers skirting the workers' compensation requirement and, frankly, it seems to me the problem is the product of disinterest by Iowa prosecutors.
Dave O'Brien, a Cedar Rapids attorney who represented an injured worker in a case against one of Watts' companies in 2010, told WorkCompCentral that, "It's criminal under Iowa law (to not cover employment-related injuries), but there's really no history of the state enforcing that."
Now that the IRS is seeking Watt's money, O'Brien says his client will probably never be able to get his injuries addressed.
Chris Godfrey, head of the Iowa Workers' Compensation Division, said there is no state fund in Iowa to pick up the costs for injured workers when uninsured employers do not.
O'Brien's client, 45-year-old Jeffrey Carter, was forced to wait two years and be qualified for state-subsidized health insurance before he could get his needed back surgery, providing a stark example of the cost shifting that occurs when employers fail their legal obligations.
The IRS case did give workers' compensation officials a better idea of how many companies Watts was operating in recent years and how extensive his unpaid financial obligations are, said Andrew Mertens, spokesman for the Iowa Association of Justice.
Attorneys for injured workers in Iowa are hoping for criminal charges to be prosecuted against Watts to set an example.
According to Jeff Thompson, an Iowa deputy attorney general, the state is considering both civil and criminal remedies for dealing with Watts' workers' compensation violations.
The civil federal tax case, meanwhile, seeks an injunction, judgments on the tax debts and foreclosure of a few residential properties Watts owns.
We have seen in other venues that civil penalties are typically not very effective against white collar criminals because they amass so much wealth and become so adept at hiding it that damages just become a cost of doing business. In fact this was Watts' strategy - incurring obligations then starting a new company to avoid payment. Watts obviously understands how to avoid civil penalties.
So the way to deal with egregious scofflaws is jail time - protracted jail time.
Perhaps now that the IRS has demonstrated just how flagrant Watts was in flouting the law, Iowa law enforcement has the information needed to permit the Department of Corrections to provide him with room and board.
"(Watts' companies) don't really seem to have a system for taking care of their workers after an injury," Mertens told WorkCompCentral. "But they're not alone. It's a pretty wide problem and there are examples all across Iowa and the country of corporate lawbreakers who aren't paying for workers' compensation insurance. The workers are paying the price."
Martens is only partially correct. Law abiding companies, and the rest of society, bear these costs too.
I submit that Iowa's failure to seek criminal redress against Watts is a failure of the state to protect its citizens. Now that the IRS has laid out the case for them, the Iowa Department of Justice and Office of the Attorney General have no choice but to move forward with a prosecution of Watts.
Dave O'Brien, a Cedar Rapids attorney who represented an injured worker in a case against one of Watts' companies in 2010, told WorkCompCentral that, "It's criminal under Iowa law (to not cover employment-related injuries), but there's really no history of the state enforcing that."
Now that the IRS is seeking Watt's money, O'Brien says his client will probably never be able to get his injuries addressed.
Chris Godfrey, head of the Iowa Workers' Compensation Division, said there is no state fund in Iowa to pick up the costs for injured workers when uninsured employers do not.
O'Brien's client, 45-year-old Jeffrey Carter, was forced to wait two years and be qualified for state-subsidized health insurance before he could get his needed back surgery, providing a stark example of the cost shifting that occurs when employers fail their legal obligations.
The IRS case did give workers' compensation officials a better idea of how many companies Watts was operating in recent years and how extensive his unpaid financial obligations are, said Andrew Mertens, spokesman for the Iowa Association of Justice.
Attorneys for injured workers in Iowa are hoping for criminal charges to be prosecuted against Watts to set an example.
According to Jeff Thompson, an Iowa deputy attorney general, the state is considering both civil and criminal remedies for dealing with Watts' workers' compensation violations.
The civil federal tax case, meanwhile, seeks an injunction, judgments on the tax debts and foreclosure of a few residential properties Watts owns.
We have seen in other venues that civil penalties are typically not very effective against white collar criminals because they amass so much wealth and become so adept at hiding it that damages just become a cost of doing business. In fact this was Watts' strategy - incurring obligations then starting a new company to avoid payment. Watts obviously understands how to avoid civil penalties.
So the way to deal with egregious scofflaws is jail time - protracted jail time.
Perhaps now that the IRS has demonstrated just how flagrant Watts was in flouting the law, Iowa law enforcement has the information needed to permit the Department of Corrections to provide him with room and board.
"(Watts' companies) don't really seem to have a system for taking care of their workers after an injury," Mertens told WorkCompCentral. "But they're not alone. It's a pretty wide problem and there are examples all across Iowa and the country of corporate lawbreakers who aren't paying for workers' compensation insurance. The workers are paying the price."
Martens is only partially correct. Law abiding companies, and the rest of society, bear these costs too.
I submit that Iowa's failure to seek criminal redress against Watts is a failure of the state to protect its citizens. Now that the IRS has laid out the case for them, the Iowa Department of Justice and Office of the Attorney General have no choice but to move forward with a prosecution of Watts.
Monday, May 21, 2012
Talk About UR in CA Has No Basis in Data
Good information is the precursor to good decisions.
In order to get good information one must have good data, or at least some data.
In California, it appears that some important decisions are pending without requisite data by which to determine if the information behind decisions is good.
In this case I'm talking about the current debate as to the cost/benefit discussion concerning utilization review (UR).
I have been critical of the industry regarding the cost of cost-containment services. Utilization review, the process of obtaining third party review of medical treatment requests, is partially a cost-containment service. I say partially because theoretically utilization review should also benefit the patient to ensure that unnecessary or ill-conceived medical procedures are not foisted upon him or her without demonstrable efficacy.
Regardless, according to the latest information from the Workers' Compensation Insurance Rating Bureau (WCIRB) cost-containment services now comprise 47% of all loss expenses, estimated to total $370 million in 2011.
The question being examined now by the California legislature is whether the system is seeing value but it seems that question can not be answered with the data that is, or rather is not, currently collected.
Pending is AB 1687, by Paul Fong, D-Cupertino, that would authorize attorney fees when an injured worker with an award of future medical treatment successfully appeals a utilization review denial.
The legislative analysis to the bill gives a broad estimate as to how many utilization review requests are denied - between 6% and 20%.
Tracing this incomplete estimate backwards to its origin - from legislative analyst Julie Salley-Gray who is a consultant to the Assembly Appropriations Committee, to bill sponsor California Professional Firefighters, to the Division of Workers’ Compensation DWC - we come to find out that DWC doesn't track this data.
The vague estimate blame then gets passed on to the Commission on Health Safety and Workers' Compensation (CHSWC).
DWC spokesman Peter Melton said in an email to WorkCompCentral that the division does not track or keep UR statistics.
“It seems these numbers are from a January 2011 CHSWC lien report,” Melton wrote.
The CHSWC lien report, however, provides only the percentage of medical liens that were filed as a result of a UR denial. CHSWC reported authorization for treatment was in dispute in 70% of liens surveyed.
Utilization review was the reason treatment was not authorized in 6% of the liens filed with the Workers' Compensation Appeals Board, according to CHSWC. The reason treatment was denied in 20% of cases was unknown or not stated.
"'Authorization,' as used in the lien report, is not the same as 'authorization' as used in UR," Melton wrote. "The 6% only means that of all medical dispute liens filed with the WCAB that did not involve a fee schedule dispute, only 6% involve UR denials. The 20% is in the 'other' category and cannot be logically related to UR denials."
So it turns out that between 6% and 20% of utilization review requests aren't really denied; they are just lien disputes and 20% of lien disputes do not have a relationship to UR denials.
The California Applicant's Attorneys Association (CAAA) has been critical of UR and on May 15 a statement saying delayed and denied treatment is a significant cost driver.
Barry Hinden, legislative chair for the CAAA and the association’s past president, said during a telephone interview for the WorkCompCentral story on Thursday that based on his personal experience he thinks that 80% or even 90% of treatment requests are denied.
Hinden's experience is going to be much different than an overall number because the cases he is managing necessarily will involve dispute - but whether it is 6, 20, 80 or 90% is still alarming because the bottom lien is that nobody knows.
Nobody knows ...
Consequently the conversation about the costs and benefits of UR is premature. We can't discuss this topic because we don't have the data to make intelligent decisions.
For that reason AB 1687 needs to be deferred. The industry doesn't really know what it is spending its money on and whether value is being created, destroyed or remaining inert.
In order to get good information one must have good data, or at least some data.
In California, it appears that some important decisions are pending without requisite data by which to determine if the information behind decisions is good.
In this case I'm talking about the current debate as to the cost/benefit discussion concerning utilization review (UR).
I have been critical of the industry regarding the cost of cost-containment services. Utilization review, the process of obtaining third party review of medical treatment requests, is partially a cost-containment service. I say partially because theoretically utilization review should also benefit the patient to ensure that unnecessary or ill-conceived medical procedures are not foisted upon him or her without demonstrable efficacy.
Regardless, according to the latest information from the Workers' Compensation Insurance Rating Bureau (WCIRB) cost-containment services now comprise 47% of all loss expenses, estimated to total $370 million in 2011.
The question being examined now by the California legislature is whether the system is seeing value but it seems that question can not be answered with the data that is, or rather is not, currently collected.
Pending is AB 1687, by Paul Fong, D-Cupertino, that would authorize attorney fees when an injured worker with an award of future medical treatment successfully appeals a utilization review denial.
The legislative analysis to the bill gives a broad estimate as to how many utilization review requests are denied - between 6% and 20%.
Tracing this incomplete estimate backwards to its origin - from legislative analyst Julie Salley-Gray who is a consultant to the Assembly Appropriations Committee, to bill sponsor California Professional Firefighters, to the Division of Workers’ Compensation DWC - we come to find out that DWC doesn't track this data.
The vague estimate blame then gets passed on to the Commission on Health Safety and Workers' Compensation (CHSWC).
DWC spokesman Peter Melton said in an email to WorkCompCentral that the division does not track or keep UR statistics.
“It seems these numbers are from a January 2011 CHSWC lien report,” Melton wrote.
The CHSWC lien report, however, provides only the percentage of medical liens that were filed as a result of a UR denial. CHSWC reported authorization for treatment was in dispute in 70% of liens surveyed.
Utilization review was the reason treatment was not authorized in 6% of the liens filed with the Workers' Compensation Appeals Board, according to CHSWC. The reason treatment was denied in 20% of cases was unknown or not stated.
"'Authorization,' as used in the lien report, is not the same as 'authorization' as used in UR," Melton wrote. "The 6% only means that of all medical dispute liens filed with the WCAB that did not involve a fee schedule dispute, only 6% involve UR denials. The 20% is in the 'other' category and cannot be logically related to UR denials."
So it turns out that between 6% and 20% of utilization review requests aren't really denied; they are just lien disputes and 20% of lien disputes do not have a relationship to UR denials.
The California Applicant's Attorneys Association (CAAA) has been critical of UR and on May 15 a statement saying delayed and denied treatment is a significant cost driver.
Barry Hinden, legislative chair for the CAAA and the association’s past president, said during a telephone interview for the WorkCompCentral story on Thursday that based on his personal experience he thinks that 80% or even 90% of treatment requests are denied.
Hinden's experience is going to be much different than an overall number because the cases he is managing necessarily will involve dispute - but whether it is 6, 20, 80 or 90% is still alarming because the bottom lien is that nobody knows.
Nobody knows ...
Consequently the conversation about the costs and benefits of UR is premature. We can't discuss this topic because we don't have the data to make intelligent decisions.
For that reason AB 1687 needs to be deferred. The industry doesn't really know what it is spending its money on and whether value is being created, destroyed or remaining inert.
Friday, May 18, 2012
Immigration Status and Home Care Reimbursement
Do you think that a non-citizen immigrant should be reimbursed for the value of care that she provides to her severely injured husband who received a big stipulated award for workers' compensation benefits?
Everest National didn't think so.
But the California Workers' Compensation Appeals Board (WCAB) did. And the 4th District Court of Appeals didn't disagree.
In Allgreen Landscapes et al. v. WCAB et al., No. G046627, Teodora Mota asserted a lien for homecare services for her husband.
Mota's husband was involved in a car accident in August 2001, which left him comatose for over a month and permanently disabled. He sustained injuries to his head, neck, jaw, low back, right leg, right shoulder, left wrist, chest, liver, nose, eyes, gums, urinary tract and gastrointestinal system, which affected his sense of smell, hearing and psyche, and rendered him impotent.
He received an 89% stipulated award for permanent disability and future medical care.
Teodora Mota filed a lien for home care 2 years later.
At trial she testified without contradiction that she had cared for her husband 24-hours a day since his discharge from the hospital. Mota said she regularly fed him, took him for walks, administered his medications, and placed his catheter.
The trial judge awarded Mota reimbursement for services at the median rate for a licensed vocational nurse in Orange County.
Everest argued that the Immigration Reform and Control Act of 1986 barred Mota's claim since she was an illegal alien and was not eligible to work in the United States.
In a panel decision this January, the WCAB noted that Mota undisputedly provided care to her husband for which Everest did not deny liability.
The WCAB reasoned that had she elected to move to Mexico for medical treatment and rehabilitation for her husband and provided the exact same care for him there, her employment status or right to reimbursement would not be an issue. That she chose to stay in the United States should not change this result, the panel said.
This is a difficult situation but I think the WCAB got the result right. It is not so much about "working" in the United States as it is about providing proper compensation.
I don't know the immigration status of Mota's husband but as we know that is irrelevant to the payment of compensation in a work injury in California. Immigration status is only relevant to vocational status post injury.
In Mota's case, that she is providing for her husband 24 hours a day, according to the facts, removes her from the labor pool in which she could otherwise generate income for the family - be it illegally in the United States, or legally in Mexico.
Everest would otherwise have had to pay for Mota's husband's care, so when one really gets down to brass tacks Everest didn't lose anything - it was responsible for the care regardless of the provider, and potentially even more expensive care.
Everest National didn't think so.
But the California Workers' Compensation Appeals Board (WCAB) did. And the 4th District Court of Appeals didn't disagree.
In Allgreen Landscapes et al. v. WCAB et al., No. G046627, Teodora Mota asserted a lien for homecare services for her husband.
Mota's husband was involved in a car accident in August 2001, which left him comatose for over a month and permanently disabled. He sustained injuries to his head, neck, jaw, low back, right leg, right shoulder, left wrist, chest, liver, nose, eyes, gums, urinary tract and gastrointestinal system, which affected his sense of smell, hearing and psyche, and rendered him impotent.
He received an 89% stipulated award for permanent disability and future medical care.
Teodora Mota filed a lien for home care 2 years later.
At trial she testified without contradiction that she had cared for her husband 24-hours a day since his discharge from the hospital. Mota said she regularly fed him, took him for walks, administered his medications, and placed his catheter.
The trial judge awarded Mota reimbursement for services at the median rate for a licensed vocational nurse in Orange County.
Everest argued that the Immigration Reform and Control Act of 1986 barred Mota's claim since she was an illegal alien and was not eligible to work in the United States.
In a panel decision this January, the WCAB noted that Mota undisputedly provided care to her husband for which Everest did not deny liability.
The WCAB reasoned that had she elected to move to Mexico for medical treatment and rehabilitation for her husband and provided the exact same care for him there, her employment status or right to reimbursement would not be an issue. That she chose to stay in the United States should not change this result, the panel said.
This is a difficult situation but I think the WCAB got the result right. It is not so much about "working" in the United States as it is about providing proper compensation.
I don't know the immigration status of Mota's husband but as we know that is irrelevant to the payment of compensation in a work injury in California. Immigration status is only relevant to vocational status post injury.
In Mota's case, that she is providing for her husband 24 hours a day, according to the facts, removes her from the labor pool in which she could otherwise generate income for the family - be it illegally in the United States, or legally in Mexico.
Everest would otherwise have had to pay for Mota's husband's care, so when one really gets down to brass tacks Everest didn't lose anything - it was responsible for the care regardless of the provider, and potentially even more expensive care.
Thursday, May 17, 2012
On the Street Corner - Do You Need a Beer?
Yesterday I smelled a rat.
Bill Cobb, VP Business Development for CompMetrics, has helped ferret out that rat in a blog post he put together along with cool charts, graphs with numbers and things that help explain the madness of the California rate making process.
What Cobb's report tells us is why carriers still write business in California despite all of the "sky is falling" rhetoric year after year (or in this case, mid-year) - because they make money even if their expense ratios are deplorable and investment returns are pathetic for professional money management. More on that below.
I asked yesterday what the big deal was about cost containment expenses. To me that is an internal operational issue and should not be cause to raise rates and premiums on employers. If a carrier can not exercise the discipline to keep its costs under control then that is the carrier's problem - that's a cost of doing business.
Bill Cobb, VP Business Development for CompMetrics, has helped ferret out that rat in a blog post he put together along with cool charts, graphs with numbers and things that help explain the madness of the California rate making process.
What Cobb's report tells us is why carriers still write business in California despite all of the "sky is falling" rhetoric year after year (or in this case, mid-year) - because they make money even if their expense ratios are deplorable and investment returns are pathetic for professional money management. More on that below.
I asked yesterday what the big deal was about cost containment expenses. To me that is an internal operational issue and should not be cause to raise rates and premiums on employers. If a carrier can not exercise the discipline to keep its costs under control then that is the carrier's problem - that's a cost of doing business.
Cobb confirms this. Note in his analysis that medical expenses have essentially remained flat since the last "reform". The big cost driver for carriers is how much they spend keeping those medical costs down.
Bill Mudge, president of the Workers' Compensation Insurance Rating Bureau (WCIRB) blamed some of the increases on the difficulty of establishing and maintaining medical provider networks. I don't buy that - MPNs have been around since 2004. Why all of a sudden are they costing more? The MPN industry in California is now mature with known entities and players.
Mudge also postulated that some of the cost increase could be blamed on an increase in continuous trauma (CT) claims - where are the statistics to support that? And why do CT claims cost more to cost-contain? Again, I don't buy that. This does not seem logical to me. CT claims have been around since the beginning of [workers' compensation] time.
The WCIRB seeks a rate increase on ESTIMATED increases in costs. Is this not a self-fulfilling prophecy?
I know that reserving requires a bit of art to perform properly and much of this art involves the skillful estimation of future expenses. But I'm wondering why projections of cost-containment services can't go DOWN.
Bill Mudge, president of the Workers' Compensation Insurance Rating Bureau (WCIRB) blamed some of the increases on the difficulty of establishing and maintaining medical provider networks. I don't buy that - MPNs have been around since 2004. Why all of a sudden are they costing more? The MPN industry in California is now mature with known entities and players.
Mudge also postulated that some of the cost increase could be blamed on an increase in continuous trauma (CT) claims - where are the statistics to support that? And why do CT claims cost more to cost-contain? Again, I don't buy that. This does not seem logical to me. CT claims have been around since the beginning of [workers' compensation] time.
The WCIRB seeks a rate increase on ESTIMATED increases in costs. Is this not a self-fulfilling prophecy?
I know that reserving requires a bit of art to perform properly and much of this art involves the skillful estimation of future expenses. But I'm wondering why projections of cost-containment services can't go DOWN.
I said yesterday that the numbers don't make sense to me, but that is not unusual because when it came to math I was not gifted with the right set of genes to develop those skills.
But even I can see when numbers don't appear to add up.
For instance, Cobb has a three great graphs demonstrating accident year increases in Estimated Ultimate Costs of an indemnity claim, increases in Indemnity Costs per indemnity claim and Allocated Loss Adjustment Expense Costs (ALAE) per indemnity claim.
In the first two instances it is absolutely clear that since 2008, after the system adjusted to the 2004 reforms, there essentially was stabilization in both medical costs and indemnity costs.
What continued to inflate, well past wage basis levels, is the ALAE costs, with a inflation rate of 11.9% per year. ALAE, as a percentage of combined costs, rose from 23% in 2004 to 46% in 2011.
Now as to those profits. According to Cobb's analysis, by the end of 30 years, due to the magic of modern day finance and the power of compound interest, carriers still put over thirty cents of every premium dollar in their pockets even after paying out 100% of claim costs. This can explain why Tokio Marine was interested in Delphi Financial and Delphi's workers' compensation holdings, including Advantage Insurance.
Compared to the average publicly traded company, workers' compensation insurance has a poor rate of return - but it's that long term cash flow that keeps the clocks ticking and why carriers won't flee California. The world's seventh largest economy just has too much available opportunity to abandon.
I don't have a problem with carriers making a profit - even an outsized profit (I'd invest!). Profitability of the line is necessary for carriers to participate and for a health distribution of the risk (we saw what happened when capacity dried up and the State Fund ended up with nearly half the market).
However, lack of transparency when the hand is out creates mistrust and uneasiness. Kind of like the homeless person on the street corner - are you going to give your money to the person whose sign says they can get a job, or the one that says "Let's be honest, I need a beer"?
But even I can see when numbers don't appear to add up.
For instance, Cobb has a three great graphs demonstrating accident year increases in Estimated Ultimate Costs of an indemnity claim, increases in Indemnity Costs per indemnity claim and Allocated Loss Adjustment Expense Costs (ALAE) per indemnity claim.
In the first two instances it is absolutely clear that since 2008, after the system adjusted to the 2004 reforms, there essentially was stabilization in both medical costs and indemnity costs.
What continued to inflate, well past wage basis levels, is the ALAE costs, with a inflation rate of 11.9% per year. ALAE, as a percentage of combined costs, rose from 23% in 2004 to 46% in 2011.
Now as to those profits. According to Cobb's analysis, by the end of 30 years, due to the magic of modern day finance and the power of compound interest, carriers still put over thirty cents of every premium dollar in their pockets even after paying out 100% of claim costs. This can explain why Tokio Marine was interested in Delphi Financial and Delphi's workers' compensation holdings, including Advantage Insurance.
Compared to the average publicly traded company, workers' compensation insurance has a poor rate of return - but it's that long term cash flow that keeps the clocks ticking and why carriers won't flee California. The world's seventh largest economy just has too much available opportunity to abandon.
I don't have a problem with carriers making a profit - even an outsized profit (I'd invest!). Profitability of the line is necessary for carriers to participate and for a health distribution of the risk (we saw what happened when capacity dried up and the State Fund ended up with nearly half the market).
However, lack of transparency when the hand is out creates mistrust and uneasiness. Kind of like the homeless person on the street corner - are you going to give your money to the person whose sign says they can get a job, or the one that says "Let's be honest, I need a beer"?
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