Friday, March 29, 2013

CA's AB 1138 - More Burdensome Paperwork

Onerous, punitive and impractical - that's how opponents describe California's recently amended Assembly Bill 1138 - and I'm one of them.

AB 1138, Ed Chau, D-Alhambra, was amended March 21 to add language that would require employers to post on their premises a list of all covered employees and update the information quarterly, or each time a covered employee is removed or added. The bill originally proposed nonsubstantive changes to a section of the Labor Code dealing with citations and penalty assessment orders on employers.

The recent amendments to AB 1138 would require employers to maintain a list of covered employees including names, addresses and the last four digits of Social Security numbers. The employers would have to provide the list to the Division of Labor Standards Enforcement (DLSE), the Department of Industrial Relations (DIR), the Department of Insurance, the Employment Development Department and its workers' compensation carrier.

The bill says “the exclusive remedy provision shall not apply for compensable injuries and illnesses suffered during a period that an employee is not included in a notice of covered employees or the list of covered employees.”

On top of that, the bill says that the “absence of the name of any employee on any notice of covered employees or any list of covered employees … conclusively establishes that the employer did not secure payment of compensation from an insurance carrier.”

Employers would be required to retain copies of all covered employee notices and lists for at least five years. Failure by an employer to retain each notice or each list or provide copies to DIR or DLSE would also conclusively establish that the employer was uninsured under the provisions in AB 1138.

Finally, an employer that fails to post a list of covered employees would face a fine of $100 per employee for the first violation and $500 per employee for additional violations. An employer that fails to turn over records when requested by a state agency is subject to a fine of $250 per employee for the first violation and $1,000 per employee for subsequent violations.

The bill is backed by the California Labor Federation - they say they don't intend to penalize honest employers but that they want employees to be able to see if they’re covered and make sure they actually are an "employee."

The goal, says labor, is to allow enforcement agencies, when making a call on an employer to audit employees versus independent contractors, to more easily discern which workers are, in fact, insured and which workers are not insured.

First off, most employers have no idea who is an independent contractor versus an employee under the eyes of the law - in particular since the standards concerning that distinction are different for Federal tax purposes and the definitions applicable to workers' compensation.

Second, employers already report on a quarterly basis employees to the Employment Development Department. Labor standards enforcement agencies should start there for the list of "employees" when the decide to audit an employer - no extra cost to the government or to employers since this is already in place.

Finally, I don't think any employee reads the mandated postings now, let alone some new posting with even more information. Most people don't care until something happens and some benefit is denied - then it's the lawyers that care and the issue of a posting becomes more of a litigation tool rather than an enforcement mechanism.

AB 1138 is just a bad idea and imposes more government on responsible employers and will do nothing to stop unscrupulous employers from subverting the law.

Thursday, March 28, 2013

Chronic Pain, Opioids and Physician Risk

A few weeks ago I posted an opinion that Kentucky was leading the nation in the control of opioids.

Referencing their prescription drug database, KASPER, and a new law, I said opinions of the Kentucky Medical Association, Kentucky Pharmacy Association and Board of Medical Licensure that the new law was "workable" was "a pretty good endorsement for a law that has such broad and sweeping impact."

There are two sides (at least) to every story, and my opinion drew some criticism from some Kentuckians with first hand experience with the law and the KASPER system - their sentiments essentially were that Kentucky law (HB1) went too far, and that doctors now are too scared to prescribe ANY pain medication.

Here are some of the (edited) comments.

Justin wrote:

"I think someone should tell all the doctors in Kentucky that are refusing to treat chronic pain patients (even ones with clean KASPER's) since HB 1 (2012) was enacted that: 'the major players are, if not happy with the end result, at least are not unhappy with it.' and 'The Kentucky Medical Association, Kentucky Pharmacy Association and Board of Medical Licensure have indicated that the changes made by HB 217 are workable.' Because to a chronic pain patient in Kentucky who is unable to get their pain medications since HB1 was first enacted back in July of 2012, HB1 is pretty flippin' far from 'workable'!

"Since HB1 was passed in July of 2012, people in pain from all walks of life and from all kinds of circumstances have been unable to get treated for their pain! This includes chronic pain patients, emergency room patients, and even some hospice patients (which are some of the reasons why HB 217 was passed so darn quickly!). Chronic pain patients who have been going to the same doctor for years, who have taken the same medications for years without incident, and who have clean KASPER’s, can no longer get their pain medications because of HB 1! Doctors all over KY are now afraid of losing their license or being investigated by the DEA because of HB 1- they have been dropping their chronic pain patients left and right because they are afraid to prescribe any kind of narcotic to anyone for any reason!"

"HB 1 is a piece of 'shotgun legislation.' It was not well thought out, it had little input from the medical community, and no input from the people affected most by this heinous law- the chronic pain patients that depend on these medications for a certain quality of life! HB1 punished the many innocent for the acts of the guilty few!"

Laura added:

"HB1/HB217 does not address the needs of patients with chronic pain. While prescription drug abuse does need to be curtailed in Kentucky, this law passes the consequences of drug abuse from the abusers onto the backs of law abiding citizens and hard-working Ky families."

"Law abiding citizens who are the victims of violent crime, bad medicine (such as the rash of faulty female reproductive appliances such as Mirena and the Vaginal Mesh, and faulty replacement hips), and injured veterans should not have to suffer in pain or be treated like criminals because they need pain care."

Kim said:

"Not aware of any lab tests or diagnostic studies that can confirm three of my diagnoses: fibromyalgia, restless legs syndrome, or interstitial cystitis. Where would that put me in the "angry patients" theory that sorts out the fakers by confirming their need for pain medications through lab and x-ray results?"

Shiela wrote:

"This law was aimed at stopping abuse which is a great idea, however I do not think law makers thought this through on how it would hurt many many people. When people have had TEST AFTER TEST (TESTS SUCH AS MRI'S CATS SCANS, PET SCANS, EX-RAYS, ULTRA SOUNDS, ECHO'S ECT DO NOT LIE) to prove they have the medical condition in which they need medication for and Doctors will NOT even allow them to come to their office due to fear this law has created is a travesty. I for one have seen many many people suffer, including a family member that received a organ transplant and was allowed 3 days worth of pain medication after being released from UK hospital."

ewoods commented:

"The doctors should not stop treating patients just because they are being asked to run backgrounds on people. As soon as the law was signed my doctor refused to help me with my pain anymore. So why is it we have to suffer while the doctors can turn their back on us patients, and for those of us with no insurance we cannot afford to go to a pain clinic and there are very few that accept cash."

Sick & Tired stated:

"Lawmakers obviously didn't consider the suffering of cancer, hospice/end of life and surgery pain to begin with. Are we to assume they didn't have the knowledge or do they lack compassion or both? It's scary to think they're deciding who suffers and who doesn't. ... I've never been to a pill mill but thanks to HB 1 my legitimate doctor can't prescribe this legitimate chronic pain patient with the small amount of medication that helped make life worth living without too much suffering."

Perhaps its serendipity, but a recently introduced California bill, SB 410 (Leland Yee, D-San Francisco), would give state physicians immunity from disciplinary action for prescribing and dispensing dangerous drugs to treat chronic pain.

The bill, which is sponsored by the California Society of Anesthesiologists, would amend Business and Professions Code Section 2241.5 to say, “A physician and surgeon may prescribe for, or dispense or administer to, a person under his or her treatment for a medical condition dangerous drugs or prescription controlled substances for the treatment of pain or a condition causing pain, including, but not limited to, chronic pain or intractable pain.”

Presently the Intractable Pain Law, which was enacted in 1990, says a physician should exercise “reasonable care” to determine when a referral or consultation with a more qualified pain or addiction specialist is necessary. It also notes that “no physician and surgeon shall be subject to disciplinary action for prescribing, dispensing or administering dangerous drugs or prescription controlled substances in accordance with this section.”

The opposition to SB 410 says that under Yee’s bill, a doctor could prescribe narcotics to anyone who reports any kind of pain, not just to cancer patients or patients with other terminal diseases.

The debate, the experiences of those in Kentucky, the difficulty in drafting laws to accomplish reasonable controls over pain medication while still providing adequate enforcement provisions and protection of patients, shows how incredibly difficult it is to accommodate the needs of society.

The problem is a uniquely complex balancing of the needs of law-abiding, chronic pain sufferers seeking some semblance of quality of life versus unscrupulous profiteers with no respect for the law or the health of individuals.

I don't have a solution. I do appreciate the complexity of the issue and it is likely that many others, such as those who took the time to write me from Kentucky, will be unnecessarily adversely affected while the profiteers find some other way to advance their own interests.

Wednesday, March 27, 2013

Survey Shows Work Comp Foreign to Immigrants

The New Hampshire Department of Health and Human Services (DHHS) reported that a recent survey of immigrants on occupational health and work safety showed that most of them never heard of workers' compensation.

In order to assess knowledge of workers’ compensation, participants were asked if someone in the U.S. ever told them that their medical bills would be paid by workers’ compensation insurance if they are hurt because of their work. If respondents answered yes, they were asked to write down who told them.

227 participants out of 366 (62%) were not aware of workers’ compensation. Only 76 individuals out of 126 who said yes to understanding workers’ compensation wrote who told them. Sources identified included supervisors, human resources, family members, friends, doctors, co-workers, teachers, and NH Coalition of Occupational Safety and Health (COSH) through safety training classes.

Of the 366 participants in the survey, 29 noted they had been injured at work.

Common body parts affected included hands, fingers, wrists, backs, knees, feet, elbows, and abdominal regions.

The majority of those injured on the job had been in the U.S. for either 4-6 years or 6+ years.

Out of those 29, 17 were lost time claims.

23 told their supervisors of their injuries. 4 did not report their injuries because they left the job due to the injuries, a finger cut was not considered "serious," one felt that if the injury had been reported "nothing would change," and one said they would be fired.

The survey reflects that the respondents felt that their jobs involved injurious work conditions more often than not, which would be reflective of the manual labor conditions one would expect immigrant labor to be performing.

Of these conditions, respondents felt more often than not that safety issues were known but not taken seriously.

But the overall experience of respondents is that there is generally good supervisor support and that "bad treatment" was almost never experienced.

The top three jobs reflected in the survey were factory/production, cleaning, and food service - in total representing 67% of all job responses.

Perhaps reflecting a shift in immigration patterns, 44% reported country of origin being Asia with other nationalities substantially less.

The sampling reflected 28% with some college education, and 32% graduating high school levels.

It's a small sampling so the study has its limitations - those are noted in the report. Nevertheless it is telling that even with a relatively educated immigrant working population, workers' compensation seems either misconstrued or suspect as a protection system.

The report is here.

Tuesday, March 26, 2013

Big Business versus the EWJ

While the ongoing dispute concerning whether professional sports employees (aka athletes) in the National Football League can seek redress for their work injuries in California in contravention to collective bargaining contract provisions seems limited in scope, what happens with the NFL cases can have implications for many, many different occupations.

The most recent legal maneuvering has a federal court consolidating three lawsuits concerning 118 players in which the players have pursued their California claims despite an arbitrator's final and binding order to cease and desist.

In addition the NFL has filed a countersuit seeking attorneys fees from the players, and a declaration that the plaintiffs must file all workers’ compensation claims in the venue specified by their contracts and drop any pending claims in California.

As you likely know this controversy concerns California's recognition of cumulative trauma as an injury - a relatively unique provision of law that isn't a part of most other states work comp systems.

Cumulative trauma scares the NFL (and its insurers) because of the recent increase in claims for traumatic brain injury - these cases can involve millions of dollars in medical expense over the life of the athlete.

The arbitrator in the 118 cases found that the players pursuing claims in California all signed contracts requiring them to file workers’ compensation claims in the state where the team was located.

He ruled that there is a distinction between a claim for a specific injury occurring in California and a cumulative trauma claim. A player can’t contract away his right to file a claim in California for a distinct injury suffered in the state, but choice of forum and choice of law clauses can be invoked to prevent a player from filing a cumulative trauma claim in California, said the aribtrator.

The players' argue that the arbitrator ignored the law, denied them due-process rights and violated California public policy.

While this legal action was going on, the California Workers' Compensation Appeals Board (WCAB) ruled that it does not have jurisdiction over such injury allegations where there is a forum-selection clause in a collective bargaining agreement.

The player in the WCAB case, former Arizona Cardinals Dennis McKinley, has appealed saying the California law prohibits the enforcement of a forum-selection clause that would force a party to a jurisdiction where no relief is available. Because the statute of limitations to file a claim expired in Arizona, McKinley can’t file a claim in that state and the WCAB should have exercised jurisdiction over his case, court documents say.

The WCAB has many more NFL cases pending.

In the meantime, the NFL and its supporters from other sports leagues, have been pursuing legislative remedies in California, Arizona and other states, with bills that would limit the ability of professional athletes (specifically football, baseball, hockey and basketball) from seeking redress in any other state's work comp systems where there is a forum selection clause.

All of this activity, publicity, argument and discourse has incited passion, particularly with football fans, who are particularly passionate themselves about the game. The perception of the Everyday Working Joe (EWJ), from what I've been reading in public forums, is that the players are whiners, not content with their good fortune of playing in the NFL and making huge sums of money.

What is lost in the debate, however, is the global effect of these cases and legislative actions - if it's a football player's rights today, who's to say it's not a pipe welder's, or field worker's, or traveling salesman's rights tomorrow?

California law already has provisions where workers under a collective bargaining agreement may be subject to alternative arrangements for work injuries, including arbitration of disputes. These are known as "carve-outs."

But there are certain limitations.

For instance, no contract can deny a worker benefits any less than what would be available under normal California law. And while disputes may be subject to arbitration, an award is always subject to review up the chain of appeal just like any award from a workers' compensation judge.

Most people don't care about the NFL cases. To the EWJ this is nothing that affects them other than the possibility of an increase in ticket prices, or perhaps the relocation (or non-location) of a sports franchise. They don't see any connection between what happens to the rights of a big time sports star and their jobs in the Daily Grind.

The old saying, ignorance is bliss, applies to most things workers' compensation for the EWJ until they actually have a work injury. Then the tune changes.

In any debate one can either sit on the sidelines, or take a side. I'm taking a side - the side of the players.

What we are seeing is nothing more than an attempt to subvert a state's laws through contract. In my mind, that is a very dangerous legal precedent to uphold, and must be examined very, very carefully for the consequences to society can be damaging beyond imagination.

In the big picture, this is not about forum selection, binding arbitration, cumulative trauma, or any of the other legal arguments.

It's about Big Business versus the EWJ.

This argument was settled 100 years ago and the verdict then was that workers' compensation was a cost of doing business.

Monday, March 25, 2013

The Ullico Lesson: Cash is King

I have to admit, I didn't learn much in business school. There was lots of theoretical instruction, but in truth the practical application, at least in my experience, was limited until I went out in the real world as an entrepreneur - then certain lessons would miraculously come to life.

But there was one lesson that had always struck a chord, that was so basically simple that it could not be misconstrued, forgotten or misapplied and I "got it" immediately without the need for real world practical application.

My basic finance professor, Mr. Dainese, would in every single class always go back to his one simple rule of business: cash is king.

The lessons in his simple statement were relentless with many case examples of high falootin' big time business people losing everything because they couldn't pay the bills. Lots of assets that weren't readily liquidable meant that when times got tough creditors got tougher.

Cash is king - those three words have provided me with a lot of guidance through the years in business.

The executives at Ullico Casualty Co. would have done well to heed that advice too.

As reported by WorkCompCentral on Friday, the Delaware Insurance Commissioner's office obtained a rehabilitation order and injunction from the Delaware Chancery Court to take control of Ullico Casualty on March 11.

At that time the company's claims department was $52 million in the hole. It also had racked up $380 million in liabilities against assets of roughly $327 million.

Workers' compensation insurance makes up roughly 81% of Ullico Casualty's premium volume. While it is unknown how much of that volume was comprised of professional employer organizations (PEOs), that line of business is apparently what put the tourniquet on the company's cash flow.

According to one company it is estimated that in the last two years, Ullico Casualty was embroiled in more than 60 lawsuits, many of them against PEOs, "in an effort to extract funds…to improve its deteriorating finances."

Ullico apparently had a big appetite for risk.

The big problem was that many of these PEO policies were large deductible contracts with deductibles as high as $1 million. Because insurers are required to pay first-dollar coverage on claims, they rely on policyholders to reimburse them for losses up to the deductible amounts.

The problems with the PEO industry over the last couple of years are legendary and have filled up many pages of news reports in the work comp industry and even in this blog.

When Ullico went out and sued everybody to shore up its finances, it sent a bad message to its policyholders - that the company was in trouble. Consequently the policyholders withheld even more, not wanting to throw good money at bad money.

Christopher Wadsworth, a Florida attorney who represents a PEO that Ullico Casualty is suing, told WorkCompCentral's David Dankwa, "They already had a lot of our money held in escrow and we were afraid they would go into receivership and we would lose the money they were actually holding in escrow. We knew they were in financial straits and we did not want to give them more money."

In the meantime Ullico's cash problems highlight a concern that had been expressed by the Florida Workers' Compensation Insurance Guaranty Association - that if there's going to be large-deductible policies there also needs to be sufficient collateral to execute against in the event of a failure.

It doesn't get any more basic than that. Forget all the fancy financial tricks and sophisticated schemes with fanciful names. If you can't pay the bills you're out of business.

Cash IS king.

Friday, March 22, 2013

Controlling Opioid Roaches

While health care expert and noted blogger Joe Paduda told the audience at the annual California Workers' Compensation Institute's (CWCI) meeting in San Francisco yesterday that opioids are the biggest problem facing the industry today, Georgia lawmakers were passing a bill that they hope will take the "roach" element out of the state.

First, Paduda: “This is such an inherently huge problem,” he said. “It’s the biggest problem facing the industry today. If we don’t get our arms around it, it is going to eat the industry alive.”

CWCI's new president, Alex Swedlow, said that the organization's research into opioids occurred because it was the number two cost driver after attorney involvement.

The reason, as Paduda explained, is because after six months of opioid use there is addiction, declination of functioning, destruction of health, extension of disability, and ultimately death.

Paduda cited an Appalachian community school where 13 kids were left parentless last year because of opioid deaths. There are only 110 kids in the entire school...

“We’ve become the addiction-creation industry,” Paduda said. “That’s our fault. We’re the ones enabling the physicians to prescribe the wrong drugs. We’re paying for them.”

Georgia has decided that it isn't going to pay for them anymore. Or at least is going to slow down the process.

House, HB 178 will require the Georgia Composite Medical Board – the agency that licenses Georgia doctors – to begin licensing pain clinics on July 1, 2013.

The bill would apply to any medical practice that advertises the treatment of pain, uses pain in the name of the clinic or treats more than 50% of non-terminal patients with drugs on Schedules II and III of the U.S. Drug Enforcement Administration's controlled substances list.

The bill "grandfathers in" clinics that are operating by July 1 and are at least partly owned by Georgia-licensed physicians.

Bill supporters say Georgia became a haven for pill mills that moved north when the Florida Legislature passed its own pain clinic bill in 2011. The Florida legislation imposed tough licensing standards on pain clinics and banned physicians from dispensing of Schedule II and III drugs, except in limited instances.

Georgia Senate Health and Human Services Committee Chairwoman Renee Unterman, R-Buford, a prime sponsor of the pill-mill bill, told the Senate on Thursday the number of pain clinics in Georgia jumped from 10 in 2010 to more than 140 last year because of the northward migration from Florida.

"There are a lot of bad apples in these pain clinics. They fled like roaches from Florida, and, when they heard that we were going to come in and start regulating them, the clinics started shutting down and moving to another state," Unterman said.

"Millions and millions of dollars can be made at these pain clinics because they keep people addicted to drugs."

Unterman has the issue firmly in grasp - the addiction model of opioids creates a nice recurring revenue stream for the purveyors of the drugs. In the meantime the costs to workers' compensation claims is exponentially increased, as reflected by CWCI's data.

Paduda says the work comp industry has an obligation to do something about opioids - and I agree. The issue that we face in work comp is the liberal requirement to provide virtually any medical treatment requested by or on behalf of an injured worker (more likely than not, on behalf of...). States are now giving tools to the industry to "just say no" (thanks Nancy Reagan!) with treatment guidelines, control via networks, etc.

Insurance companies, such as California's State Fund, are taking initiatives by telling their network doctors that strict adherence to treatment guidelines when it comes to prescriptive medication must be followed and that failure to do so, or offer a medically sound reason for not doing so, will result in non-payment and/or elimination from the network.

That kind of financial hard talk works. CWCI's data shows that California's share of the opioid problem is leveling off.

Can the industry do more? Sure - California needs to see a declination in opioid usage, not just a flattening of the trend. But the tools start with the laws that provide the underlying structure.

Christine Baker told the CWCI audience that the administration will address opioid abuse with treatment guidelines. Division of Workers’ Compensation Medical Director Dr. Rupali Das and the Commission on Health and Safety and Workers’ Compensation are both working on opioid treatment guidelines, she said.

To be sure, California has its issues. We're a big state, lots of people, lots of money, lots of problems.

Paduda commented that we in California think we have problems, but he said it is nothing like Florida, where the legislature has been struggling to get something done about physician dispensed repackaged drugs for many sessions.

He said that he was asked by a Florida legislator where he got his data from concerning the social and business costs of prescription medication - CWCI was Paduda's answer. The legislator asked why he was using California data - the response from Paduda: because Florida doesn't have a CWCI...

Thursday, March 21, 2013

CA's "Lien Problem" - Don't Believe The Data

One of the reasons given for the harsh treatment of liens in California's most recent reform legislation, SB 863, was that liens were overwhelming the system.

How liens were overwhelming the system was not specifically identified or defined. Everyone was just told, and most took it at faith, that lien filing was "a problem."

It was assumed, since the propaganda was coming from the Administration, that the filing of liens were "a problem" for the Division of Workers' Compensation (DWC) despite the fact, as I had pointed out on numerous occasions that liens only presented a burden to the DWC if such liens required a hearing - otherwise it was just "paper" going into the system.

Of course it really wasn't paper since the Administration had a sparkling new $60 million computer system (EAMS) allegedly engineered for electronic self-filing of documents, including liens.

And in reality, the majority of liens have been electronically filed since the early 1990s because the last time the Administration had a "lien problem" the Electronic Data EXchange (EDEX) system was devised that had its own funding mechanism (20 cents per filing).

But because there was a "lien problem" the authors of SB 863 decided that it was necessary to impose a lien filing fee, and a lien "activation fee" for liens that were filed prior to 1/01/2013. In addition any liens that aren't "activated" prior to 1/01/2014 are dismissed as a matter of law - lien armageddon.

The proponents of lien armageddon are smart people and certainly didn't believe their own propaganda for they were well informed that the start of lien fees would simply be the target date for getting liens filed, regardless of the maturity of the underlying claim.

In fact, data that I saw from third party filing engines into EAMS supported the forecast and were showing a doubling, or more, of lien filings.

This observation was supported by independent statistics released yesterday by the Workers' Compensation Insurance Rating (WCIRB).

According to the data reviewed by the WCIRB from EAMS the total number of liens filed in 2012 hit 1,179,526, compared to 463,856 liens filed in all of 2011.

The last two quarters of 2012 saw 836,423 liens filed.

The defense players on the other hand saw a neat way to deny payments to these vendors, demanding proof of payment of fees before even talking to vendors about their bills - this prompted a recent warning by the DWC that such practice would not be tolerated and would lead to imposition of audits and fines.

But don't trust the statistics because the underlying data is suspect.

Case in point - that $60 million computer system says that out of those million or so liens filed in 2012, 357 were from copy services.

I know the copy service guys - they file 357 liens in ONE DAY.

So while the EAMS data reflects that there were 691,203 medical liens, 206,119 medical-legal liens, and 123,621 interpreter liens, it is quite obvious that the characterization of liens that were filed is flawed.

I would expect, however, that the provisions of SB 863's lien armageddon will eventually result in a drop in filings of liens - anecdotal evidence from those third party fling engines again supports this observation. So the law will ultimately perform as intended with a reduction in liens filed.

The big question is whether the mass destruction of liens will result in overall system efficiencies and cost reductions. Certainly in 2013 and 2014 I would expect to see some reductions since millions of dollars of claims will be systematically eliminated. But this doesn't necessarily translate into cost savings, only that the value of claims is reduced. We don't really know just how much of those claims would have translated into actual money transferring hands.

And because of EAMS sloppy data we don't really know where the savings would be coming from.

Basing any sort of claim of efficiency, cost reduction or victory on lien armageddon is a red herring. The data is flawed, the savings amorphous (other than a one time event - which may not occur if some lien claimants do as propose and seek appellate reconciliation of legal rights underlying the liens), and doesn't account for the actual burden on the California adjudication system (the District Offices of the Workers' Compensation Appeals Board) both before and after SB 863.

Proponents of lien armageddon should party now while the (unsubstantiated) lien data is fresh. My suspicion is that, ultimately, there won't be any big net effect on system costs after 2014.

Wednesday, March 20, 2013

The Money Must be Okay

There had been indications in the past couple of years that a "hardening" of the workers' compensation market was inevitable and that "profitability" would return to the line.

A report this morning in WorkCompCentral reflects that trend, and some surprisingly candid quotes from insurance executives indicate that carriers are willing to endure the tough times in work comp in exchange for the chance to write the more profitable lines.

The cost of capital and comparatively low investment returns require increased reserves. High combined ratios in consecutive years might shake a mono-line writer, but for multi-line, multi-jurisdictional carriers, its just a marketing opportunity.

“Because it is a long tail line, insurance companies have to set more capital aside to support those liabilities," Mark Wilhelm, CEO of Safety National Casualty Corp. told WorkCompCentral's David Dankwa. 

"So, if your return on equity on workers' compensation is lower than any line of business, plus you have an additional capital charge associated with that, a carrier has to ask themselves, 'Why am I doing this?' In many cases they do it simply as an accommodation to write the more profitable coverage,” said Wilhelm.

Dankwa observes however that there are some carriers that are questioning this practice and may be pulling back, but both Wilhelm and Robert Hartwig, president of the Insurance Information Institute, say they do not expect significant consolidation or contraction in market share among the major market leaders, even though some like AIG and Liberty Mutual have indicated they are not as anxious to write workers’ comp this year.

Why? Because after seven consecutive quarters of rate increases, workers’ compensation insurance rates are outpacing loss trends with double digit premium growth in the major markets.

For instance, American Financial Group recently said its California workers’ comp business recorded its first double-digit price increase of 11% in 2012 during the fourth quarter.

And AmTrust, a multiline insurer that started as a monoline workers’ comp writer, said it is experiencing the largest rate gains in major markets such as California, where prices are up roughly 18%, and in New York and Florida, where they have jumped 8.3% and 8.1% respectively.

American International Group reported that its workers’ compensation business in the United States raked in rate increases of 12.4%.

Joe Paduda, who writes the blog Managed Care Matters (and coincidentally will be the keynote speaker at the Annual California Workers' Compensation Institute meeting tomorrow in San Francisco), wrote yesterday that senior level executives at the big carriers misconstrue what business they're in; that they think they're in the insurance business when they are really in the managed health care business.

"Senior management misunderstands their core deliverable – they think it is providing financial protection from industrial accidents, when in reality it is preventing losses and delivering quality medical care designed to return injured workers to maximum functionality. That lack of understanding is no surprise, as most of the senior folks in top positions grew up in an industry where medical was a small piece of the claims dollar, where medical costs were considered a line item on a claim file or number on a loss run, and not “manageable”, not driven by process, outcomes, quality.

Paduda is looking at workers' compensation from the claims perspective. Claims in only one aspect to workers compensation.

Another aspect is much more basic, and easier to understand - profits. Insurance is a business, pure and simple. There is nothing altruistic about workers' compensation insurance. Preventing losses and delivering medical care are just expense items.

I often deride vendors in the workers' compensation business who seek special interest protectionism in either legislation or regulation, but insurance companies are no different. If insurance companies can not make a buck, either directly or indirectly, from workers' compensation then they will get out of the business.

So while I don't exactly disagree with Paduda's assessment of executive thinking, it needs to be tempered with the fact that "C-level" executives have a very simple mandate - provide a profit to investors.

Paduda's comments may reflect how best to regulate the costs associated with the line and that's commendable. But let's all get back to basics - if there isn't money to be made then the business goes elsewhere.

With what I'm seeing, the money must be okay in workers' compensation.

Tuesday, March 19, 2013

Can't Pass Buck in Failure To Communicate

Timmy Vuncannon was an inmate at Tippah County jail serving 118 days for unpaid fines and misdemeanor alcohol-related offenses in December 2005.

The Tippah County Sheriff designated him a trustee, eligible to perform work outside the jail through a county work program. Vuncannon earned $10 per day for the work.

In January 2006, when he was about halfway though his sentence, a Tippah County Sheriff’s deputy instructed Vuncannon to report to the scene of a local drug bust to assist with the seizure of property.

Vuncannon alleged that the scene was under the control of representatives from the Sheriff's Department, the Mississippi Bureau of Narcotics, the Federal Bureau of Investigation, the Drug Enforcement Administration and the Bureau of Alcohol, Tobacco, Firearms & Explosives.

After he arrived at the scene, Vuncannon said these government agents instructed him to use a forklift to load items into the bed of a tractor-trailer.

Vuncannon had no training in the use of forklifts, and his assignment required that he drive a forklift up a ramp that was not made for use with the truck he was loading, and the ramp had not been placed on a flat surface.

The ramp detached from the truck as Vuncannon was driving the forklift down the ramp, causing the forklift to fall to the ground while he was driving.

Vuncannon filed a tort action against the various government agencies whose agents had been present at the time of his accident in the federal trial court for the Northern District of Mississippi.

He sought $17 million in damages for his lost earnings and lost earning capacity, as well as payment of unspecified medical expenses and punitive damages.

The Shelby County Health Care Corp., which owned the facility where Vuncannon received treatment for his injuries, filed a complaint in intervention. The care provider asserted that the county was liable for Vuncannon's $640,648.91 hospital bill.

The county later settled Shelby's claims, and the two entities joined together to sue the Public Entities Workers' Compensation Trust.

They argued that the trust, as the insurance carrier for the county, was liable for Vuncannon's medical expenses.

They lost at trial and again on appeal.

The appellate court noted that Mississippi's Workers' Compensation Act defines an "employee" as a person under a "contract of hire" and that required some consent on the part of the injured to "work" along with consideration and control of the employee by the employer - any purported consent by Vuncannon to volunteer his labor was "at best illusory when examined against the backdrop of Mississippi’s long-held practice of requiring convicts to work," the court said. 

I keep thinking of "Cool Hand Luke" and the inmates working the road out under the hot sun, and the exchange between Captain (Strother Martin) and Luke (Paul Newman):

Captain: You gonna get used to wearing them chains after a while, Luke. Don't you never stop listening to them clinking, 'cause they gonna remind you what I been saying for your own good.
Luke: I wish you'd stop being so good to me, Cap'n.
Captain: Don't you ever talk that way to me. (pause, then hitting him) NEVER! NEVER! (Luke rolls down hill; to other prisoners) What we've got here is failure to communicate. Some men you just can't reach. So you get what we had here last week, which is the way he wants it. Well, he gets it. I don't like it any more than you men.

Seems to me the failure to communicate was reversed in this situation - Tippah County failed to communicate appropriate requirements for foklift safety...

In Vuncannon's case, the court mentioned it had doubts about the "necessity and practical import" of inmates like Vuncannon having workers' compensation coverage since "Mississippi law saddles the incarcerating county with the burden of paying an indigent inmate’s hospital bills" and it is the county, and not Vuncannon himself, that is going to be stuck with the hospital costs at issue.

I reckon Tippah County will be a bit more motivated now to follow appropriate safety practices when using inmate labor - like ensuring proper forklift training and appropriate equipment set up.

The full story is here. The US 5th Circuit Court of Appeals opinion is here.

Monday, March 18, 2013

Free Choice Pharmacy Debate A Smoke Screen

Does it matter whether injured workers have a choice as to where they get their prescriptions filled?

To me the answer to the question depends upon whether any particular choice is tainted by some special interest profiteering at the expense of the system.

In theory, open competition for the business of filling a prescription seems to make sense - after all a competitive marketplace should, according to theory taught me in business school, offer the best prices for the best products and services.

But this is workers' compensation, and workers' compensation is not a competitive marketplace. It is a regulated marketplace, which means that, for the most part, free market concepts are hindered by the mandatory nature of comp.

In other words, because nearly every employer must be subject to workers' compensation, and nearly every employee must submit to workers' compensation, there is no true market competition (except in Texas where work comp is optional). Consequently, any "free choice" in workers' compensation is tempered by the fact that in truth neither the employer nor the employee can go outside the system.

So workers' compensation is really a captive market, and thus requires regulation, because captive markets are very, very easy to manipulate and game.

There is a nascent trend, that started and failed in New York last year, for free choice pharmacy benefits, or right to choose. Proponents tout that the free market competition that would be permitted by "free choice" will control costs and provide better outcomes.

Proponents of pharmacy choice legislation, led by Injured Workers Pharmacy (IWP), a national mail-order pharmacy specializing in prescriptions for injured workers, are pursuing legislation in New Hampshire, Senate Bill 95 by New Hampshire Sen. Sharon Carson, R-Londonderry, that would give injured workers the right to choose where they get their prescription drugs.

This group attempted similar legislation in New York last year but the bill did not get passed.

IWP, which relies on referrals from claimant attorneys as opposed to networks, views the successful passage of pharmacy choice legislation as critical to its business. That makes sense.

The opposition in New York was led by pharmacy benefit management companies, and a right to choose pharmacy bill would certainly impair the PBM business model, so I can understand the opposition too.

The New Hampshire bill would also introduce a fee schedule for pharmacy benefits. Currently, in New Hampshire, fees for pharmaceuticals are based on a usual and customary rate system - and believe it or not that is where some opposition is coming from.

According to the WorkCompCentral story on the topic this morning,  George Roussos, a lobbyist for the New Hampshire Association of Domestic Insurance Cos., who was the only person to speak in opposition to SB 95 at a committee hearing last Thursday, said, "Why is it that these pharmacies need to be protected by having assurances of a certain price which translate to mean a certain profit?"

I think Roussos has it backwards. As we have seen in other states that have already grappled with "usual and customary" pharmaceutical fees, eventually because of the captive market of work comp, prices get out of control. A fee schedule helps control excess profiteering.

The PBMs and insurers who oppose pharmacy choice legislation believe routing a prescription through a network increases patient safety and could potentially alert the pharmacist and payer to harmful medication issues. They argue prescriptions filled outside pharmacy networks and PBMs do not undergo these safeguards.

I think the arguments on both sides are much more basic than patient safety, convenience, protection or pharmaceutical safeguards. 

The real issue is simply special business interests protectionism.

My guess is that one in a hundred injured workers, if even that many, gives a rat's derri√®re about where their medications come from, how much they cost, etc. 

There is nothing about the patient's interests that is driving this argument. Anyone proffering that argument is engaging in a diversionary tactic, also known in more common parlance as a "smoke screen."

The first thing that needs to be acknowledged in the debate is that such proposed legislation is all about money - who gets what, when and how.

If the parties can come to terms with that basic fact then perhaps some reasonable compromise can be achieved. Otherwise, leave the injured worker out of the debate because it has nothing to do with their best interests.

Friday, March 15, 2013

Physicians In The Dust

Here's the facts of a very recent Iowa appellate court case that exemplifies the opioid abuse problem.

Gallo v. Penford Products Co., No. 3-081/12-1472.

Gallo had been a warehouse worker for the Penford Products Co., a producer of specialty, naturally-based ingredient systems for papermaking, food and animal products.

He injured his lower back in February 2005 while dislodging a 50-pound bag of product from a palletizer machine and went to see Dr. Nate Brady at the St. Luke's Work Well Clinic in Cedar Rapids.

Brady took Gallo off work for a week and prescribed Percocet, a narcotic pain-reliever that Gallo had requested by name.

First mistake...

Gallo returned to see Brady twice more in March after suffering additional back strains at work and he remained on the Percocet for two more months.

Second mistake...

During that time, Gallo went to see Dr. Gordon Urbi, a family practitioner in Cedar Rapids, complaining of extreme back pain when he bent over to pick up clothing at home. Gallo obtained a prescription for another painkiller from Urbi in April 2005.

Four days later, Gallo went to see his personal physician, Dr. Casey Boyles, and he received a prescription for hydrocodone and muscle relaxants.

Do you think by this time that a state wide prescription drug database such as the Kansas KASPER or the California CURES system would catch these red flags?

The following month, Gallo returned to Boyles' office complaining of worsening pain symptoms. An MRI indicated that he had a new right side disk fragment and a herniated disk at L4-L5.

Gallo underwent surgery, but continued to complain of pain.

In July 2005, he received a transforaminal nerve block. That same month, Gallo reported hurting his back while moving a refrigerator at home and Boyles prescribed him Lortab, a Schedule II opioid pain medication.

One week later, Gallo came back to see Boyles and said he strained his back while sneezing. He obtained a second Lortab prescription with one refill.

On Aug. 5, 2005, Gallo went to see his wife's physician, Dr. Wayne Alberts. Gallo told Alberts that he needed a refill on his pain medication, but Boyles was out of town and unable to provide it. Alberts issued him a prescription for Lortab.

Within a week, Gallo had a second nerve block, and he returned to Boyles' office for more Lortab on Aug. 22.

The following month, Gallo was arrested for impersonating a doctor in order to obtain even more prescription pain medication.

Gallo had a history of drug abuse and underwent treatment in 1997 for addiction to narcotic pain relievers dating back to 1995. He also admitted abusing recreational and prescription drugs, including marijuana, morphine and hydrocodone.

In October 2005, Gallo checked into the Sedlacek Center for substance abuse treatment and he began seeing Alberts for symptoms of depression.

On multiple occasions between March and June 2006, Gallo went to the Mercy Medical Center emergency room complaining of back pain.

He received prescriptions Lortab, ibuprofen and hydrocodone.

Gallo did not report his history of prescription medication abuse to Mercy staff and claimed he did not have a family physician, even though Alberts was treating him at that time.

Again, would a prescription drug database system have been effective in catching this clearly addiction-based behavior?

Throughout this whole period, Gallo was still working at Penford up to 56 hours per week (though frankly I can't imagine that he was very efficient or effective in his "work").

Penford fired him in January 2007 after learning Gallo had been convicted for impersonating a doctor to obtain prescription medications.

Several physicians evaluated Gallo to determine his level of impairment, and they all returned findings that Gallo was able to work in some capacity.

Gallo also met with vocational consultant Steve Mootz in November 2007, but Mootz reported Gallo was unwilling to cooperate and lacked motivation to find a job, even though he had realistic prospects for obtaining work.

Deputy Workers' Compensation Commissioner Michelle McGovern noted that at the time Gallo met with Mootz, Gallo was collecting more than $5,000 per month in disability benefits from the Railroad Retirement Board, the Social Security Administration and the workers' compensation carrier for Penford.

McGovern posited that this substantial level of income might have been responsible for Gallo's reticence in finding new work.

That is a good theory in my opinion.

She determined that Gallo had a 60% industrial disability because of his back, and ruled his claimed depression was not compensable.

Gallo lost all the way up the appellate chain and though his attorney told WorkCompCentral he was considering further appeals it seems quite clear to me that Gallo should be happy with his 60% rating - that is one tough fact pattern to overcome and convince anyone, let alone a court of review that can not change any findings of fact, to reverse.

Now consider what could happen if this fact pattern occurred in Nevada, and Nevada had in place Senate Bill 75, by Richard Segerblom, D-Las Vegas.

SB 75 would allow any person who suffers an "injury" as a result of an addiction to a prescription drug to sue the manufacturer of the drug and possibly the prescribing doctor to recover actual damages, any costs associated with rehabilitation for the addiction, attorney fees and punitive damages.

The patient would have to prove the prescribing doctor knew or should have known about an existing addiction to the drug he prescribed to prevail in a lawsuit. The bill contains no such burden of proof for lawsuits against drug manufacturers.

Segerblom told the Associated Press after a hearing in the Senate Judiciary Committee on March 6 that he thinks providers are relying too much on prescription drugs.

Seems to me like Gallo had one up on the providers in his case - his creativity in drug acquisition, and collection of disability from multiple sources, would make a mockery of SB 75 and all that would be left is physicians in the dust.

Crazy man, just crazy...

Thursday, March 14, 2013

The NCOIL Answer to Special Interest Profiteering

The National Conference of Insurance Legislators (NCOIL) has adopted a model repackaged drug law that would cap prices.

Physicians groups, including the Florida Medical Association, the Maryland State Medical Society and Maryland Workers' Compensation Health Care Association, are arguing that doctors will stop dispensing drugs if price caps become law in Florida and Maryland.

Florida lawmakers are scheduled to debate a proposal to cap the price for repackaged drugs at the original manufacturer's average wholesale price plus a $4.18 dispensing fee for the fourth year this session.

Maryland lawmakers are considering a bill that would limit physicians to dispensing a 30-day supply of drugs to injured workers within 72 hours of an injury or discovery of an occupational disease.

Automated Healthcare Solutions (AHS), which sells dispensing software to doctors, argues injured workers face delays from carriers and pharmacies when doctors don't dispense the drugs.

Arizona, California, Colorado, Connecticut, Georgia, Illinois, Michigan, Mississippi, South Carolina and Tennessee all have adopted rules capping the price of repackaged drugs.

Idaho just passed a law that ties payments for repackaged drugs to the original manufacturer’s wholesale price without any separate reimbursement for the doctors who dispense the medications. The rule takes effect July 1.

But Hawaii can't get a deal done. None of the four repackaged drug bills introduced in Hawaii were passed ahead of a March 7, 2013, deadline for bills to move from their house of origin.

Some states, such as Texas, prohibit physician dispensing whatsoever.

Perhaps it is coincidental, or maybe it's part of the equation, but Texas' workers' compensation costs are among the lowest.

So here we have a plethora of states, likely with good data, to either enforce or refute the arguments advanced by AHS, the Florida Medical Association, the Maryland State Medical Society, the Maryland Workers' Compensation Health Care Association, and others who are against repackaged drug price caps or physician dispensing prohibitions.

It seems to me that if these folks had a good argument they would be presenting studies based on the data from these states that have implemented different practices to determine: a) whether doctors stop dispensing drugs if there are price caps and, b) what sort of delays, if any, are faced by injured workers who can't get their drugs from their doctor directly.

Maybe they have an argument, but if they do then it should be supported by data and facts, not hyperbole. Prove it and the skeptics will shut up.

But without solid evidence behind the arguments I, and many others, am having a very tough time believing the prognostications of dooms day for injured workers or physicians.

In the meantime, the NCOIL model requires:
  • Prices be based on the average wholesale price set by the original manufacturer and assigned to the National Drug Code used by the original manufacturer or on the stock packaging used by the authorized drug distributor.
  • All pharmaceutical bills submitted for repackaged drug products include the NDC number of the original manufacturer registered with the U.S. Food and Drug Administration or the manufacturer's authorized distributor.
  • Reimbursements to be based on the current published manufacturer's average wholesale price – calculated on a per unit basis – as of the date of dispensing.
  • A repackaged national drug code shall not be used and shall not be considered the manufacturer's NDC number. When providers don't include the manufacturer's NDC number, reimbursements should be limited to the average wholesale price assigned to the lowest priced therapeutically equivalent drug.
  • Dispensing fees otherwise provided in state law shall be payable when applicable.

I don't know - these model laws don't seem too terribly invasive or restrictive. It seems to me that there is still plenty of reasonable profit available when a physician dispenses drugs directly to the patient. The point is to remove the inherent conflict of interest - there's a reason why dispensation of drugs is, by law and by practice, done by a pharmacy.

So if the opponents to repackaged drug controls have good, solid, peer reviewed studies proving their anecdotal arguments, please share them with the industry.

In the meantime, states that are having a tough time regulating this practice need some legislators with some cajones, or at least a modicum of morals, to control what, to me, is nothing more than specialty interest profiteering at the expense of society. 

Wednesday, March 13, 2013

How A New Rating Schedule Gets Conceived

California Labor Code section 4660(i) mandates that Commission on Health and Safety and Workers’ Compensation (CHSWC) "shall conduct a study to compare average loss of earnings for employees who sustained work-related injuries with permanent disability ratings under the schedule, and shall report the results of the study to the appropriate policy and fiscal committees of the Legislature no later than January 1, 2016."

The first element of that work is published in the March edition of the Journal of Occupational and Environmental Medicine by researchers Frank Neuhauser, with the University of California, Berkeley, and Rand Corp. researchers Seth A. Seabury and Dr. Teryl Nuckols.

“American Medical Association Impairment Ratings and Earnings Losses Due to Disability" was commissioned by CHSWC and concludes that the Guides do a pretty good job of equating impairment to overall function (or disfunction as the case may be), but also that the Guides impairment ratings do not correlate well with economic loss. 

In other words there is disparity between the body part impaired and how that impairment translates to economic loss because one body part is more important to certain occupations than other body parts are to other occupations.

“I think people often make the mistake in blaming AMA for having low impairment ratings when the impairment rating doesn’t determine the level of compensation,” Neuhauser said. “The AMA Guides are a good measure of impairment, but how you translate that into dollars is what matters for adequacy.”

Another thing that the study found was that the 5th edition of the Guides rated back impairment lower in a relative fashion than other body parts - thus back injuries resulted in greater economic losses compared to other body parts but weren't credited with enough impairment to be equitable.

That disparity is even greater in the 6th edition.

Neuhauser said researchers plan to explore whether additional modifiers for pre-injury wage and gender might also improve the correlation between an impairment rating and wage loss.

If you haven't noticed over the course of recent history, many of the studies commissioned by CHSWC eventually end up as topics for debate in the process of some proposed workers' compensation legislation. I suspect that further study will occur as suggested by Neuhauser and that somewhere along the legislative road there will be a bill to amend how permanent disability ratings are calculated in California.

SB 899 law in California, which was ushered in by, and subsequently ignored by the Schwarzenegger Administration, was that the permanent disability rating schedule was to be revisited and revised every five years to account for potential disparities and inequities.

That section, Labor Code section 4660, was amended by SB 863 and that provision is no longer there, replaced by the language, "Until the schedule of age and occupational modifiers is amended, for injuries occurring on or after January 1, 2013, permanent disabilities shall be rated using the age and occupational modifiers in the permanent disability rating schedule adopted as of January 1, 2005."

It seems to me that there are three conclusions to be drawn from the conclusions made in this study:

1) Having an intermediary resource to evaluate the relative impact of an injury on the overall functioning of the body is necessary in order to provide as level a playing field as possible in comparing one body part to another;

2) Impairment ratings are only one factor in the determination of equitable compensation if society wishes to compensate for the permanent effects of an injury; an impairment rating needs to be adjusted for economic impact relative to several other factors including age, occupation and how an injury impacts future economic losses.

3) Eventually California will adopt a new rating schedule, probably sooner than later, and likely prior to 1/1/16.

An abstract of the article can be viewed here.

Tuesday, March 12, 2013

Support SB 809 - The Cure for CURES

“There are many people who benefit from the status quo who are well-funded and well-established in (the Capitol),” Sen. Mark DeSaulnier, D-Walnut Creek, said to a crowd of about 50 members of the National Coalition Against Prescription Drug Abuse and a handful of media on the north steps of the Capitol on Monday about his bill, SB 809.

DeSaulnier is more concerned with funding CURES rather than expanding access.

First things first in other words.

Funding California's prescription drug monitoring systen is paramount to the state in order to get a handle on its share of the prescription drug abuse dilemma. Once its operations are assured then access can be expanded so that workers' compensation participants can use the system in due course, if that's even necessary.

SB 809, introduced last month for legislative debate, would require the Medical Board, Dental Board, State Board of Pharmacy, Veterinary Medical Board, Board of Registered Nursing, Physician Assistant Committee, Osteopathic Medical Board, State Board of Optometry and the Board of Podiatric Medicine to increase licensure, certification and renewal fees charged to practitioners authorized to dispense or prescribe controlled substances by up to 1.16%. The bill would also require the State Board of Pharmacy to increase fees charged to wholesalers and veterinary food-animal drug retailers by up to 1.16%.

Additionally, the bill would require health care practitioners and pharmacists licensed to dispense controlled substances to apply to the state Justice Department for access to CURES and to consult with the database before prescribing or dispensing Schedule II, Schedule III or Schedule IV controlled substances. Currently, enrollment in CURES is voluntary.

Finally, the bill would impose an annual tax on drug manufacturers and a one-time tax on insurers – including workers’ compensation carriers – to fund CURES. The bill does not propose an amount for the tax.

The bill would provide $5 million to upgrade the CURES system and $3 million annually to keep it running according to DeSaulnier.

The debate, in California, is that access to CURES, and any attempt to control outcomes, is tempered by two existing laws: the Intractable Pain Law and the Pain Patient’s Bill of Rights.

The Intractable Pain Law says a physician or surgeon shall not be subject to disciplinary action for prescribing or administering controlled substances to treat a patient for whom “the generally accepted course of medical practice” has not relieved or cured the cause of the pain.

The Pain Patient’s Bill of Rights says a patient suffering from severe, chronic, intractable pain has the option to request or reject the use of any or all possible treatments. While a physician can refuse to prescribe opioids, he must inform his patient that there are physicians who specialize in pain treatment with methods that do include the use of opioids.

Of course the issue with these laws is that pain is largely a subjective factor, so most of the determination of how much pain a patient has, or doesn't have, is based on patient self-reporting which can be notoriously unreliable.

Still, having at least one level of checks and balances should prevent the wholesale abuse of prescription drugs - i.e. the distribution of pills into the black market and thus onto the streets. Being able to monitor just how much drug is dispensed to a person over a certain course of time will alert professionals to potential diversion of drugs.

DeSaulnier's office knows how difficult it is going to be to get this bill passed as the opposition is well funded and well connected. Keeping it simple reduces the chances of objection.

The job of society can't be to protect every single individual - as laudable as that might be, it is next to impossible. Neigh the job is to protect as many in society as efficiently and efficaciously as possible and consistent funding of CURES helps do this.

Monday, March 11, 2013

The Louisiana Approach to Repackaging

How long do you think someone from the drug repackaging industry will take to figure out around this little issue?

The Louisiana Court of Appeals ruled that a doctor who dispenses medications to an injured worker cannot assign his interest in being paid for his services to the pharmaceutical company that gave him the drugs.

In 2007, Physician Partner, a pharmaceutical repackager located in Thousand Oaks, Calif. whose parent company is Rebel Distributors Corp., contracted with Dr. Thomas Heard, an orthopedic surgeon and proprietor of the St. Thomas Clinic in Louisiana, for the provision of 27 different medications for his workers' compensation patients. 

The contract provided that the medications would be provided to Heard on a consignment basis, and his clinic would dispense the medications directly to his patients without a prescription. Physician Partner would then send an invoice to the patients' employer and/or workers' compensation insurer demanding payment.

In August 2008, work comp carrier LUBA Casualty informed Physician Partner that it would no longer provide reimbursement for physician dispensed medications. Physician Partner sued LUBA to collect on medications that Heard had dispensed to patients whose employers were insured by the carrier.

At the summary judgment hearing the trial court ruled in favor of LUBA, on the grounds that Physician Partner had no right of action against LUBA because it was not a health care provider or an agent of a health care provider as defined in the Louisiana Workers' Compensation Act.

So Physician Partners went back to the drawing board and presented a new contract with Heard that defined the relationship as one of "agency."

Trial ensued and the court ruled in favor of Physician Partners, but said reimbursement was to be based on the manufacturer's average wholesale price for the drug.

Physician Partners didn't like that it couldn't get its 500% to 800% markup, and LUBA was offended that it had to pay anything at all. So both appealed.

The Court of Appeals concluded that the original 2007 agreement between Physician Partner and Heard was for the "assignment of a non-assignable right to collect for the health care services provided by Dr. Heard to his patients."

The court also concluded that the second, replacement, contract "cannot retroactively breathe new life into the attempt by Rebel Distributors/Physician Partner to collect an assigned workers' compensation medication claim."

Ergo, Physician Partners did not get reimbursed on about $150,000.

And I say GOOD.

Of course the issue isn't over. Rumor has it that drug repackagers are going to the legislature, as they have in Florida.

There is no justifiable reason for physician dispensing beyond sample prescriptions to get the patient quick relief. Not only are there pharmacies everywhere except for the most remote of locations, but prescriptions can be filled on-line, by mail, and various other ways. A physician does not, and should not, be the point of distribution for prescription medication.

The only reason for a physician to dispense medication beyond sample sizes is for profit, and that creates an inherent conflict of interest, particularly in the fact pattern in this case, where the dispensing physician has no risk in the game and all business functions are handled by the marketing/supply firm that is providing the drugs and receivables services.

Some states limit the amount of reimbursement that physicians can get on repackaged drugs, and others just prohibit the practice all together. Both methods work.

The Louisiana court's approach also works.

*************************

Related story this morning in the Wall Street Journal:

Oregon, Colorado, Washington and Idaho have the nation's highest rates of prescription-drug abuse according to a new survey. Drug-trafficking rings have sprouted in Washington, Colorado and other sparsely populated Western states since 2009, according to law enforcement.

Friday, March 8, 2013

Cuomo's NYSIF Raid - Just More Taxes

I have not hidden my distate for lawmakers that see the state workers' compensation insurance fund as their piggy bank, ready to be broken any time a few extra dollars are needed to make up for some budgetary deficit.

So it was with a bit of interest that I read this morning that some New Yorkers are calling for the rejection of Gov. Cuomo's proposal to raid the State Insurance Fund (NYSIF) reserves of $1.75 billion.

I know that Cuomo's administration doesn't like to call it a raid - they think that's too strong of a position.

I don't care - that's what it is. Because reserves are in place for one thing only - to pay the claims of people injured on the job and to make sure there's enough to pay for them in the future in a financially sound way.

Four builders' exchanges and the New York Council of Nonprofits have called on lawmakers during the past two weeks to defeat a section of Cuomo's $142.6 billion budget that will transfer $250 million from NYSIF reserves to the state's General Fund on April 1 and another $500 million to the Transformative Capital Fund.

The 2013-2014 budget includes a five-year plan that would transfer another $500 million to the state general revenue fund in 2014, $250 million in 2015 and $250 million in 2016.

Cuomo's people say NYSIF doesn't need the money because it was for assessments to support the New York State Workers' Compensation Board (WCB), to pay claims from the state's Reopened Case Fund and to pay off legacy claims from the Special Disability Fund, which lawmakers closed to new claims in 2007.

The argument made by Cuomo's administration is that the WCB now requires NYSIF to pay those assessments as a percentage of its losses, so the cost of the assessments must be tacked onto claims reserves. In addition, proposed legislation accompanying Cuomo's budget plan would assess NYSIF by percentage of premiums, as private carriers are, starting April 1.

The plan would also would consolidate the 18.8% in assessments – the highest in the nation – and close the Reopened Case Fund.

The Council of Nonprofits said the NYSIF has paid the assessments but has not passed the cost of the state's levy for the Special Disability Fund – about 9.6% of premiums – along to policyholders because of its substantial reserves. 

Thus, Cuomo's proposal is actually imposing a hidden tax on businesses of about 10%.

This is the kind of stuff that makes business owners scream about the cost of workers' compensation when the actual financial imposition of providing this protection to workers is much less. Not only is a big chunk of the cost unrelated to the actual delivery of the product but is the kind of sudden, dramatic spike that causes havoc with business plans and budgets.

Cuomo's proposal also includes the issuance of $800 million in bonds to pay off claims from failed group self-insured trusts. The bonds would be repaid through assessments on former trust members.

In other, more direct terms, more taxes without any benefit to those being taxed - bonds are borrowed money and will need to be paid back.

According to the WorkCompCentral story, Cuomo's plan is supported by the American Insurance Association and the Independent Insurance Agents & Brokers of New York. They complain that the NYSIF for too long has had a competitive advantage by passing some of the cost of the state's assessments along to policyholders.

I'm guessing my limited math skills get in the way of understanding this argument. The way I see it Cuomo's plan would actually end up costing policyholders even more via assessments. Perhaps the argument is that the competitive advantage is not on the marketing side, but on the operational side of insurance companies.

According to the Cuomo budget, the NYSIF raid will provide hundreds of millions of dollars for government construction projects.

Contractors aren't buying that.

Aaron Hilger, executive director of the Builders Exchange of Rochester, put it best in my opinion:

"A lot of our members were shuffled into the New York State Insurance Fund when the ABC trust closed down. We think that if there is excess money in the fund, it ought to go back to policyholders. We'd love to see more construction business, but we don't think taking money out of the Insurance Fund is the best approach... We have no guarantee that the State Insurance Fund will be able to pay claims down the road."

If the Cuomo administration thinks that NYSIF is harboring too much in reserves then the answer is, as Hilger suggests, to return that money to policyholders, not to shift it to some other, unrelated, purpose.

Thursday, March 7, 2013

KY Leads in Rx Controls

Kentucky has been at the forefront in the control of prescription drug abuse and took more steps yesterday when Kentucky Gov. Steve Beshear signed into law House Bill 217, sponsored by House Speaker and former state Attorney General Greg Stumbo.

HB 217 builds on last year's landmark HB 1, which gave the state's licensing boards the authority to expand the list of drugs for which doctors are required to check KASPER and to modify pharmacy reporting requirements.

KASPER is the Kentucky All Schedule Prescription Electronic Reporting system. The state requires doctors to check KASPER before prescribing drugs on Schedule II and drugs containing hydrocodone on Schedule III of the U.S. Drug Enforcement Administration's controlled substances list and required Kentucky pharmacies to upload data on all prescriptions for controlled substances every seven days.

HB 217 codifies a regulation adopted by the state Board of Pharmacy that will require pharmacies to report the filling of all controlled-substance prescriptions once every business day beginning on July 1, 2013.
In addition HB 217:
  • Requires doctors to obtain 12 months of history from KASPER before prescribing Schedule II drugs and Schedule III drugs containing hydrocodone to a patient on the first visit and every three months thereafter.
  • Removes Schedule V drugs from those for which doctors must check the database. Doctors still would be required to check the database before prescribing some Schedule III and IV drugs.
  • Removes a requirement by the Board of Medical Licensure that physicians conduct random urine tests for all patients receiving controlled substances. Doctors, instead, would be required to conduct the random tests they deem appropriate to check for abuse of each specific drug being prescribed.
The bill also allows the state's licensing boards to exempt from the KASPER requirements:
  • A doctor prescribing a controlled substance within 14 days following surgery.
  • A doctor prescribing drugs in a hospital or long-term care facility, as long as the facility has obtained a 12-month drug history on the patient within 12 hours of the patient's admission to the facility.
  • Prescriptions of controlled substances for hospice or other end-of-life care.
  • Prescriptions for the treatment of pain associated with cancer.
The bill allows the state's licensing boards to grant other exemptions to treatment protocols as long as they are approved by the Kentucky Office of Drug Control Policy.

The bill mandates that all state licensing boards require fingerprint-supported criminal record checks conducted by the Kentucky State Police and the FBI of anyone applying for a license to prescribe or dispense controlled substances.

The International Association of Industrial Accidents Boards & Commissions (IAIABC) earlier this year ultimately declined to publish its model law for the control of prescription drugs but the National Organization of Insurance Legislators (NCOIL) has taken up the task. It seems that what Kentucky has done is a good model to start from.

And it also seems that the states that have database systems established for doctors and pharmacists to report to and check likewise have something to model after.

As in any legislation there are some who are not quite thrilled with the laws, but at least according to WorkCompCentral news on the bill the major players are, if not happy with the end result, at least are not unhappy with it.

The Kentucky Medical Association, Kentucky Pharmacy Association and Board of Medical Licensure have indicated that the changes made by HB 217 are workable.

And that is a pretty good endorsement for a law that has such broad and sweeping impact.

Wednesday, March 6, 2013

Professionalism, Options and Fault

Three themes arose in conversations I had with various professionals at the DWC Educational Conference in Oakland this past Monday and Tuesday: there is a declination in the professional claim adjuster ranks, an opt-out option would win with large California employers and people keep trying to infuse fault into a no-fault system.

The declination in the professional adjuster ranks took two characteristics: a less educated, experienced work force on the front lines of claims management, and an erosion of new blood coming into the job.

Nearly every single person in which this topic of discussion came up opined that education of professional claims adjusters, despite Insurance Code mandates requiring ongoing training, failed to maintain a good level of proficiency in the claims ranks.

If you're a claim adjuster reading this, you may agree or disagree - but at least the folks I talked to were concerned that the requirements to become a claims adjuster have laxed while at the same time the actual education adjusters get ends up effectively stopping once a case load has been assigned.

With respect to case loads, most were of the opinion that the reason adjusters don't get the education needed to attain and maintain proficiency was because there simply isn't sufficient time.

Case loads have increased because so much of what an adjuster used to do has been outsourced: utilization review, bill review, medical authorization, etc. Because of the rote outsourcing of claim examination elements the claims adjuster's job has become more of technician-type of work rather than one where decision-making skills are paramount. As a consequence such decision-making skills have deteriorated on a broad basis.

Folks were also concerned that us baby-boomers who have been adjusting claims for the past 30 years are retiring or otherwise leaving the system, and that there was no concerted effort by the industry to recruit and train new adjusters, which of course puts pressure on existing case loads.

There were several people I talked to at the upper ranks of large multi-state companies with experience in Texas non-subscription systems, and they are anxiously awaiting the Oklahoma legislature to pass that state's proposed opt-out system, SB 1062, and thereafter in Tennessee.

At least in the eyes of these risk management professionals, their Texas opt-out systems are less expensive and much more efficient than workers' compensation, producing superior performance resulting in better care for their employees.

There are some, of course that are going to debate that, but the prospect that these employers could take workers' compensation into a private setting and do it better than anything a state legislature could envision was very, very appealing to them. They had no problem meeting minimum standards - to these folks, the freedom to design a plan that fit within their corporate culture to achieve the results they desired was most compelling.

It is all about control over the system and its consequences.

The last topic of discussion was the constant attempt to infuse fault into a no-fault system.

This just may be a human thing - we need to blame someone for something that we feel is inequitable regardless of what the law says.

This is common in divorce litigation - the need to blame the other for the failure of the marriage even though the law says that it is not going to pay attention to fault.

The need to ascribe fault interferes with the decision making process.

We see this in attempts to create legislation - for example the recent attempt in the filing of AB 1309 in California that would eliminate extraterritorial jurisdiction and excise continuous trauma claims in California for some professional sports athletes/employees.

According to the Los Angeles Times, California Assembly Insurance Committee Chairman Henry Perea (D-Fresno), who is the sponsor of AB 1309 said the bill is expected to be a "starting point" for a lively legislative debate over whether claims from out-of-state retired players represent abuse of the California workers' compensation system and wind up hitting all California employers with higher premiums and surcharges that pay for outstanding claims left by failed insurance companies.

Perea is blaming, ascribing fault, to a subset of claimants for a system's overall woes. In my opinion this is an improper analysis for such a dramatic change in the law.

I don't pretend to understand the psychology of blame and fault, but it is a characteristic that we need to keep in check if in fact workers' compensation is to remain a no-fault system.

So there you have it - my education at the DWC 20th Annual Educational Conference. I'm not saying any of this is right, wrong or relevant. It's just what was being talked about.

Tuesday, March 5, 2013

400% ROI on Payroll Reporting?

The top story in WorkCompCentral this morning involves a massive check cashing/premium fraud scheme that highlights the extent that businesses will go to lower their workers' compensation costs, of course to the detriment of the rest of the law abiding community.

Involving 19 people in two different federal cases, it is estimated that the schemes defrauded the former West Virginia Workers' Compensation Commission and its private market replacement BrickStreet Mutual Insurance Co., and mining companies in both Virginia and West Virginia, of millions of dollars since at least 2005.

The schemes of course were complex, and highlight the vigor some will exercise to escape paying for workers' compensation insurance and the creativity of criminals intent on making something for nothing.

The basics of the cases involve a "field auditor" for BrickStreet - someone who's job it is to validate an employer's payroll to ensure that it is properly reported for establishing premiums.

Mining companies paid this auditor "commissions" to adjust their payroll.

In one instance one mining company operator estimated he paid the auditor about $70,000 over the course of time which saved the company some $280,000 in premiums.

That's a 400% return on investment!

The check cashing scheme involved bookkeeping businesses that would inflate invoices for supplies to mining companies and then providing cash to staffing firms who used the money to pay employees to evade taxes which would also lower payroll reporting.

It seems these schemes were pretty well orchestrated with several of the members behind them being related, at least in surname, which likely helped with the coordination of the fraud.

I like thieves as much as the next guy. There is hardly anything more vile to me than someone who steals, lies and cheats.

Everyday we read and view stories about employees trying to pull off unsophisticated scams to increase their take out of workers' compensation programs. And it always seems that worker fraud is the focus of prosecutors.

For instance, even in this very same issue of WorkCompCentral, it was reported that Oklahoma Attorney General Scott Pruitt is heading on a road trip to tell employers about his plans to aggressively prosecute workers' compensation fraud.

Yesterday it was reported that an Ohio man was sentenced for returning to work as a truck driver while receiving temporary disability benefits for a prior workplace injury - he had to pay restitution of nearly $2,000 and a suspended six months of jail time for community service.

And in California a McDonald's employee was charged with work comp fraud for allegedly claiming to have suffered a foot injury despite seeking treatment for the condition prior to filing her claim.

I could go on and on - worker fraud stories are reported every day, and typically don't involve a lot of money.

The larger cases, such as this BrickStreet case, are obviously more sophisticated, more egregious, more sensational.

And fortunately also get attention reminding us that while there may be more worker fraud cases, the real money involves much bigger schemes.

Monday, March 4, 2013

A Word That's Both Noun and Adjective

One of the comments left in a lengthy thread in the WorkCompCentral LinkedIn group noted:

"I have always found it interesting that we call them injured workers, claimants etc, but we hardly call them patients. Yet, that is what they are, patients."

This struck me as particularly poignant, since the thread was all about the difficulties that vendors, in particular medical vendors, have had getting paid since the passage of SB 863 in California with the bill's imposition of filing and activation fees for liens, whether on a lien basis on as part of an approved Medical Provider Network.

The focus of the thread centered on the inability of these medical vendors to provide care to ... ahem, patients ... where either injury AOE/COE is denied for some reason, or a claimed body part is denied, etc.

The term "patient" is peculiar to the provision of medical services. Dictionary.com defines the noun usage of the word as "a person who is under medical care or treatment."

"Patient" seems to me to be a more personal reference to the person who was injured on the job.

Perhaps because the term "patient" is more personal is the reason why it is avoided in workers' compensation discussions - for if those providing services, be it adjuster, attorney, physician - actually had to acknowledge the beneficiary of these services and benefits as a human being it would be more difficult to deny care or indemnity.

"Injured worker" obviously is an accurate term, because if the human being that has been assigned a claim number was not making an assertion of injury at work, then there would be no workers' compensation filing.

And "claimant" likewise is an accurate term because the human behind the Initial Report of Injury is making a claim to entitlement of benefits.

Yet, in the medical world this person is a "patient" - at least for treatment purposes.

Medical-legal physicians prefer not to call the subjects of their reports "patients" because the term implies some relationship deeper than just an evaluation - the term "patient" connotes a relationship whereby the physician has a duty to do no harm, to provide relief in a medical context. A physician writing a report describing a condition for purposes of benefit determination doesn't have the same relationship as a physician making a prescription for treatment.

I understand this dehumanization as I often use the terms "injured worker" or "claimant." It provides some level of objectivity, impersonalization. Without this buffer our jobs as professionals in workers' compensation would become much more difficult because we too are human beings with subjective feelings and emotions that color our reality, color our world. "Claimant," "injured worker" and other terms serve to help us cope with the more difficult aspects of our jobs.

Sometimes, though, I think we allow this dehumanization to degrade our senses too much, too often, and we get into a base level of mental operation that fails us at the most critical of moments.

I look at the processes that have been invented to manage the system - the rules, the time limits, the forms - and as I've mentioned before, am amazed at how complex and seemingly illogical many of these are in relation to the day to day delivery of care and benefits.

The system itself seems to have lost the notion that there are people behind these claims, folks who have little to no understanding of the rules of engagement they have been foisted into.

To highlight, at the Division of Workers' Compensation Educational Conference in Los Angeles last week a presentation by members of the Audit Unit let the audience know that a concerted effort was going on to reduce the number of, and complexity of, required forms that are involved in claims processing.

This is good. In my opinion not only has the statutory law and regulatory environment of workers' compensation in California (and many other states) attained an unprecedented level of aggravating complexity, but the forms and other associated information intake and output are likewise confusing and intimidating.

I think a lot of people want to do the "right" thing, but when someone gets a notice which warns that one's rights may be affected in big bold print, while at the same time admonishing that one need not hire a lawyer ... who are you going to trust? The state and its complex, voluminous forms with threatening legalese, or the guy across the desk from you wearing a tie and a few diplomas behind him that can explain this mess in simple understandable terms?

When used as an adjective Dictionary.com defines "patient" as "bearing provocation, annoyance, misfortune, delay, hardship, pain, etc., with fortitude and calm and without complaint, anger, or the like."

For those who are the subject of the workers' compensation system now, they are both patients and patient.

There's a lesson in a word that is both a noun and an adjective.