Monday, April 30, 2012

California, Connecticut and the Wind

The Door's "L.A. Woman" lyrics seem particularly relevant to a certain trend in workers' compensation:

"Took a little downer 'bout an hour ago. Took a look around me, which way the wind blow."

Connecticut is seeing wind blow in its direction - physician dispensed and repackaged drugs.

What is interesting is that, according to State Workers' Compensation Commission (WCC) Chairman John Mastropietro in an interview with WorkCompCentral, there were no problems with physician dispensing and repackaged drugs just four years ago and that physician dispensing was limited only to sample drugs.

Now Mastropietro says he is hearing reports that some Connecticut doctors are charging up to 600 times the price charged by pharmacies for certain drugs.

The WCC is now considering regulations to cap prices and restrict dispensing.

"The prices that have been documented are disturbing," Mastropietro told WorkCompCentral. "There are some objections to control of free enterprise, but it's difficult to justify the price differences for what is a relatively minor inconvenience associated with not being able to pick up your drugs on the way out of the doctor's office."

Exactly the point - when unreasonable people exceed tolerable greed levels they bring on regulation to the rest of the population and create additional work and frictional costs.

In a national study of drugs in the workers' compensation system, National Council on Compensation Insurance (NCCI) reported last August that the share of physician dispensing based on total dollars spent on prescriptions in Connecticut increased from less than 10% in 2007 to more than 25% in 2009.

NCCI said medical costs now account for half of all costs in the Connecticut system.

Though Connecticut has a fee schedule, adopted in 2000, that caps the price of prescription drugs at the average wholesale price established by Medi-Span plus a $5 dispensing fee for brand-name mediation and $8 for generic drugs, doctors are buying prescriptions from drug repackagers, which are allowed to assign a new National Drug Code to the drugs they sell doctors and assign their own AWP.

Legislation enacting price caps meets incredible resistance and has failed in Florida, Hawaii and Maryland. But when enacted via regulation caps have been more successful as witnessed in California, Mississippi, Georgia, South Carolina and other states.

The issue is not whether a physician can or should dispense drugs from the office, but what the price is. 

"It's especially difficult to justify when you drive past six CVS pharmacies and a Rite-Aid on your way home from the doctor's office," Mastropietro said.

In another story this morning the Santa Clara County District Attorney's office brought charges against spinal implant hardware distributor, Implantium's chief executive officer and chief medical officer.

The allegations are that the company through the direction of the CEO and CMO fraudulently over charged for the hardware in cases involving the County, and the cities of Los Gatos and San Jose.

California Code of Regulations Section 9792.1(c)(7) provides that implantable hardware or instrumentation for diagnostic-related groups 496 through 500 "shall be separately reimbursed at the provider's documented paid cost, plus an additional 10% of the provider's documented paid cost not to exceed a maximum of $250, plus any sales tax and/or shipping and handling charges actually paid." That regulation restates state law, Labor Code Section 5318.

But who's to blame? According to a former Division of Workers' Compensation employee who was responsible for drafting many of the medical fee regulations, the public entities complaining should have paid the hospitals that "purchased" the hardware and should not have paid Implantium directly.

The hospitals have to pay for the implants first and are then reimbursed. If they don’t pay before submitting the bill to the payer, there is no basis for payment because they are entitled to what they actually paid, not what they will pay, according to Sue Honor, the former manager of the Division of Workers’ Compensation Medical Unit.

“The fee schedule is for facilities,” she said. “It identifies the definition of ‘facility’ and nowhere does it say anything about allowing a facilitator to jump in.”

So what's the connection in these two stories that are 3500 miles apart?

The jet stream blows from west to east.

And both states are dealing essentially with the abuse and regulation of medical charges. California has already dealt with physician dispensing and repackaging.

In 2007 California regulators capped the price of repackaged drugs not included in the fee schedule established by Medi-Cal at the average wholesale price set by the original manufacturer plus a dispensing fee. Now the state is dealing with reimbursement of medical hardware and there is pending legislation to do so.

So can we assume that Connecticut and other Eastern states will have to deal with reimbursement of medical hardware? I have no reason to believe otherwise given the prophesy of Jim Morrison's lyrics.

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