I'm not sure what to expect from the Rand report on earnings losses that was prepared for the California Commission on Health Safety and Workers' Compensation as directed by the legislature in SB 863 to determine the handling of the $120 million slush fund.
The idea of the slush fund was suspect from the start - it was a last minute compromise with no boundaries, no rules established, to get SB 863 passed.
It's purpose was to provide additional indemnity to injured workers with disproportionate earnings losses.
The problem from what Rand is reporting is that nearly all injured workers - at least the demographic studied - have disproportionate earnings losses.
The report says the average decline in post-injury earnings for permanently disabled workers is 42.1%.
But it's shocking that the report finds that workers with impairment ratings of 1% to 4% have an average decline in earnings of 30.9%.
And for workers with impairment ratings of 95% to 99%, the loss in earnings is 93.6%.
Either something is seriously wrong overall with workers' compensation, or something is seriously wrong with this study.
The report states, "Even uninjured workers, on average, show a 15% decline in earnings when observed during a similar period of time. This highlights the primary limitation of using actual earnings to estimate the impact of an injury – individual earnings could decline for many reasons, some of which have nothing to do with the injury."
Frankly, drawing any meaningful conclusion from this study relative to policy implementation is going to be very difficult if the Average Joe Worker over the course of the study time table has a 15% decline in earnings. This conclusion seems
The report authors assume 60,000 workers will be permanently disabled each year. I just don't see buy that - I think the number is much, much higher than that. Over 350,000 applications for adjudication of claim are filed every year with the workers' compensation appeals board district offices and most of those settle with some payment of permanent partial disability indemnity.
The authors also state that 34,380 of those workers −57.3% − will not return to their at-injury employer within two years after the injury and that 84.9% of workers who do not return to their at-injury employer, or about 29,000 employees, will experience above-average earnings losses.
Something is amiss.
The authors believe that this demonstrated decline is due primarily to attrition of workers from the EDD database over time (e.g., because of retirement, exiting the labor force, moving, etc.).
One of the premises of the study is to provide a definition of what is "disproportionately low in comparison to their earnings loss" within the meaning of section 139.48 of the CA Labor Code.
The study authors acknowledge three inherent, and big, limitations in their study:
"One is a lack of post-injury income other than earnings reported to the EDD. An individual’s actual post-injury income will include many sources that are not reported to the EDD (e.g., retirement or disability benefits). Because these are ignored in this work, it is likely that the estimates here overstate the post-injury decline in earnings and overstate the number of potential beneficiaries. Another source of uncertainty is the potential behavioral response by workers as a result of the new payment. We used a very wide range – double – of potential beneficiaries to capture this effect, but it could be improved over time as the use of the SJDB is monitored. Finally, while the aggregate benefit level is fixed
in the statute ($120 million), key factors such as the number of injured workers and economic conditions vary over time. Without knowing how many injuries there will be, and how many of those injuries will be significant enough to lead to economic losses large enough to make someone eligible for this program, it is impossible to predict exactly what the aggregate program cost will be."
Honestly - back to the drawing board on this. The Rand study is incomplete, error prone and should not be the basis at this time for such a huge change in policy. The premise behind the study is flawed.
The authors are focused on defining "disproportionately low" empirically, but the empirical evidence itself is flawed.
Rather, it seems to me that the "director" (as used in LC 139.48) should dictate FIRST what the eligibility framework is going to be - e.g. only 70% or greater PD ratings such as required to qualify for the inflation adjusted "life pension" payments.
As proposed by Rand, this program is doomed to failure. CHSWC should reject the proposals by Rand, the director should redefine the limitations of the program as authorized by the law, and Rand should go back to the drawing board for a new proposal.
Thursday, October 31, 2013
Wednesday, October 30, 2013
Trucks, WBV and Cancer
You just never know what the next big risk category is going to be in workers' compensation.
I had been persuaded by an argument offered by Charlie Kingdollar, Vice President emerging issues unit for General Re Corp., that nanomaterials would be the next asbestos.
OSHA has been particularly concerned with silica in the past couple of years.
The more recent concern trends have been obesity (in particular now that the American Medical Association suggests that it is a disease), opioids, and a little bit earlier it seems the claims trends were carpal tunnel syndrome and fibromyalgia.
Hearing loss seems to crop up from time to time, though not as an ongoing trend since that process is easily remedied through safe practices.
But it's more often than not something much less spectacular that really drives frequency and severity in simultaneous fashion, and a 2012 study published in the Annals of Occupational Hygiene may have identified "the next big thing:"
Prostate cancer in truck drivers.
There seem to be two competing theories: 1) long-term exposure to the kind of “whole-body vibration” experienced by truck drivers and other heavy equipment operators prompts the body to produce more testosterone, which is a known risk factor for prostate cancer; 2) the vibration can lead to prostatitis, or inflammation of the prostate gland, which may also be linked to prostate cancer.
The researchers found that those who drove a truck more than doing anything else were nearly four times more likely than educators to be diagnosed with a prostate cancer considered highly aggressive. (Educators were used as the baseline group because they were deemed to have very little to no exposure to whole-body vibration.)
Obviously truck driving isn't the only occupation that can induce "whole-body vibration" but it had the strongest link according to the study.
So does this mean that we can expect to start seeing profuse amounts of claims for prostate cancer coming in to workers' compensation? Perhaps.
The science of the study will be challenged. The application of the science to the individual claimant still needs the support of a reporting physician who has reviewed such studies and has some oncological expertise. And many states don't recognize occupational disease theories.
Still, sometimes the most innocuous sounding research leads to some significant shifts in the distribution medical care and indemnity.
Pennsylvania is already dealing with an epidemic of prostate cancer among its firefighters.
The National Institute for Occupational Safety and Health has adopted a final rule that adds prostate cancer to the list of more than 50 cancers that are compensable under the James Zadroga 911 Health and Compensation Act of 2010.
Carnac The Magnificent I am not, but I would not be surprised to see more prostate cancer cases going through the work comp system in the next five years or so, first from truckers, then other occupations that can prove up WBV.
Whether this turns into a trend remains to be seen. Cancer is one of our most prolific diseases and the cost of treatment and attendant social costs are enormous, so it would make sense that there is going to be some shift in ultimate financial responsibility.
I had been persuaded by an argument offered by Charlie Kingdollar, Vice President emerging issues unit for General Re Corp., that nanomaterials would be the next asbestos.
OSHA has been particularly concerned with silica in the past couple of years.
The more recent concern trends have been obesity (in particular now that the American Medical Association suggests that it is a disease), opioids, and a little bit earlier it seems the claims trends were carpal tunnel syndrome and fibromyalgia.
Hearing loss seems to crop up from time to time, though not as an ongoing trend since that process is easily remedied through safe practices.
But it's more often than not something much less spectacular that really drives frequency and severity in simultaneous fashion, and a 2012 study published in the Annals of Occupational Hygiene may have identified "the next big thing:"
Prostate cancer in truck drivers.
There seem to be two competing theories: 1) long-term exposure to the kind of “whole-body vibration” experienced by truck drivers and other heavy equipment operators prompts the body to produce more testosterone, which is a known risk factor for prostate cancer; 2) the vibration can lead to prostatitis, or inflammation of the prostate gland, which may also be linked to prostate cancer.
The researchers found that those who drove a truck more than doing anything else were nearly four times more likely than educators to be diagnosed with a prostate cancer considered highly aggressive. (Educators were used as the baseline group because they were deemed to have very little to no exposure to whole-body vibration.)
Obviously truck driving isn't the only occupation that can induce "whole-body vibration" but it had the strongest link according to the study.
So does this mean that we can expect to start seeing profuse amounts of claims for prostate cancer coming in to workers' compensation? Perhaps.
The science of the study will be challenged. The application of the science to the individual claimant still needs the support of a reporting physician who has reviewed such studies and has some oncological expertise. And many states don't recognize occupational disease theories.
Still, sometimes the most innocuous sounding research leads to some significant shifts in the distribution medical care and indemnity.
Pennsylvania is already dealing with an epidemic of prostate cancer among its firefighters.
The National Institute for Occupational Safety and Health has adopted a final rule that adds prostate cancer to the list of more than 50 cancers that are compensable under the James Zadroga 911 Health and Compensation Act of 2010.
Carnac The Magnificent I am not, but I would not be surprised to see more prostate cancer cases going through the work comp system in the next five years or so, first from truckers, then other occupations that can prove up WBV.
Whether this turns into a trend remains to be seen. Cancer is one of our most prolific diseases and the cost of treatment and attendant social costs are enormous, so it would make sense that there is going to be some shift in ultimate financial responsibility.
Tuesday, October 29, 2013
How To Make A Study Good Reading
That opioid prescriptions have a correlation to higher indemnity rates, prolonged disability and greater failure to return to work is not unexpected.
The California Workers' Compensation Institute and Axiomedics Research revisited and updated a 2008 study on the relationship between the number of opioid prescriptions and other claims characteristics titled, "Pain Management and the Use of Opioids in the Treatment of Back Conditions in the California Workers’ Compensation System."
According to report co-author Dr. Laura Gardner 40% of applicants with one opioid prescription during their first post-injury year filed indemnity claims.
67% of injured workers with three opioid prescriptions during their first post-injury year had filed indemnity claims. Claimants with six or more opioid prescriptions during their first post-injury year had the highest rate of indemnity claims, with 85% to 92% of their claims resulting in indemnity claims.
Likewise, that there is a link between higher opioid prescriptions and attorney involvement isn't surprising - data already shows that increased potential for indemnity is related to increased attorney participation.
Because applicants with more opioid prescriptions are more likely to file an indemnity claim, they could also be more likely to hire an attorney to represent them.
The data also revealed a strong correlation between the amount of medical benefits paid on a claim, and the number of opioid prescriptions an applicant received, the study finds.
And of course these cases are harder to settle or get closed.
If there's only one opioid prescription the claims closure rate averaged 87%. Applicants with three opioid prescriptions had a closure rate of 76%, workers with six opioid prescriptions had a closure rate of 67% and applicants with nine opioid prescriptions had a closure rate of 62%.
What IS surprising to me is that, 5 years after that original study, we are still working towards some "solution" to this issue.
The overall majority of all claims presented involve back sprains and strains.
A 2012 CWCI study concluded that workers with these types of injuries accounted for 10.6% of California's job injury claims, but only 1 in 7 of these injuries involved a permanent disability payment, they had a relatively low attorney involvement rate, and those that resulted in lost-time closed more quickly than other types of claims, so they accounted for only 7.8% of California workers' compensation benefit payments.
The American College of Occupational and Environmental Medicine guidelines do not recommend opioids for patients with simple back sprains and strains. So it would seem that if utilization review (now backed up by independent medical review) were effective then we should see some declination in these numbers over time.
The California Workers' Compensation Institute and Axiomedics Research revisited and updated a 2008 study on the relationship between the number of opioid prescriptions and other claims characteristics titled, "Pain Management and the Use of Opioids in the Treatment of Back Conditions in the California Workers’ Compensation System."
According to report co-author Dr. Laura Gardner 40% of applicants with one opioid prescription during their first post-injury year filed indemnity claims.
67% of injured workers with three opioid prescriptions during their first post-injury year had filed indemnity claims. Claimants with six or more opioid prescriptions during their first post-injury year had the highest rate of indemnity claims, with 85% to 92% of their claims resulting in indemnity claims.
Likewise, that there is a link between higher opioid prescriptions and attorney involvement isn't surprising - data already shows that increased potential for indemnity is related to increased attorney participation.
Because applicants with more opioid prescriptions are more likely to file an indemnity claim, they could also be more likely to hire an attorney to represent them.
The data also revealed a strong correlation between the amount of medical benefits paid on a claim, and the number of opioid prescriptions an applicant received, the study finds.
And of course these cases are harder to settle or get closed.
If there's only one opioid prescription the claims closure rate averaged 87%. Applicants with three opioid prescriptions had a closure rate of 76%, workers with six opioid prescriptions had a closure rate of 67% and applicants with nine opioid prescriptions had a closure rate of 62%.
What IS surprising to me is that, 5 years after that original study, we are still working towards some "solution" to this issue.
The overall majority of all claims presented involve back sprains and strains.
A 2012 CWCI study concluded that workers with these types of injuries accounted for 10.6% of California's job injury claims, but only 1 in 7 of these injuries involved a permanent disability payment, they had a relatively low attorney involvement rate, and those that resulted in lost-time closed more quickly than other types of claims, so they accounted for only 7.8% of California workers' compensation benefit payments.
This means that opioids disproportionately affect a small percentage of claims.
The American College of Occupational and Environmental Medicine guidelines do not recommend opioids for patients with simple back sprains and strains. So it would seem that if utilization review (now backed up by independent medical review) were effective then we should see some declination in these numbers over time.
I'm not sure that's happening - such cases are not increasing based on the statistics I've recently seen, but they are not decreasing either.
Which brings me to the point that I was making yesterday: we have lots of numbers that paint a big picture. But those numbers don't do us any good unless we get to the number "one" - the individual that is the tree in the forest.
How do we use this information to make sure that "one" doesn't end up in the high percentage cohort? The only way that happens is with focused attention.
We make grand policy changes through legal and regulatory mandates. These are all well intentioned, but unless we take the time to deal with "one" then the claim is lost to the big statistical group.
This is not an easy task in our current, process oriented, managed benefit system. The efficiencies realized with systematic treatment of claims masks the difficulty each "one" presents - every claim, despite similarities, is different.
I think that most of us in this business want to do the very best we can for claimants whose files come across our desks, but it takes a lot of stamina and fortitude.
For those professionals who are able to sustain the incredible energy day in and day out paying attention to "one," hats off to you! May the rest of us learn from your hard work and dedication. By dealing with "one" we can over time make these studies more joyous reading.
Which brings me to the point that I was making yesterday: we have lots of numbers that paint a big picture. But those numbers don't do us any good unless we get to the number "one" - the individual that is the tree in the forest.
How do we use this information to make sure that "one" doesn't end up in the high percentage cohort? The only way that happens is with focused attention.
We make grand policy changes through legal and regulatory mandates. These are all well intentioned, but unless we take the time to deal with "one" then the claim is lost to the big statistical group.
This is not an easy task in our current, process oriented, managed benefit system. The efficiencies realized with systematic treatment of claims masks the difficulty each "one" presents - every claim, despite similarities, is different.
I think that most of us in this business want to do the very best we can for claimants whose files come across our desks, but it takes a lot of stamina and fortitude.
For those professionals who are able to sustain the incredible energy day in and day out paying attention to "one," hats off to you! May the rest of us learn from your hard work and dedication. By dealing with "one" we can over time make these studies more joyous reading.
Monday, October 28, 2013
The Number One
We do a lot of measuring in workers' compensation.
In claims we measure costs and time, and we break these measurements down into industry nomenclature that is puzzling to most such as "frequency" and "severity."
We measure "loss costs" and we can determine "combined ratios." Numbers are good because they make it easy to quantify our actions, or inactions. Anytime something happens in workers' compensation our deeply rooted nature is to give it a number.
We have file numbers, claim numbers, policy numbers, statute and regulation numbers.
Numbers help define workers' compensation.
Numbers make it relatively easy to understand how much a given claim is going to cost (that's called "reserving" in the claims department). And it's not that difficult to estimate how many injuries are going to occur over any given period of time for any particular occupation or industry.
People are trained to put together all sorts of numbers to determine how much a law change is going to affect the financials of the industry.
Still other people are trained in "data analytics", which is basically big number crunching to determine what sort of trends these numbers portend.
Knowing this information helps professionals determine if something is amiss because historical trends provide some basis upon which to determine future action.
But a lot of times these measurements get in the way of understanding what is really going on.
When we really get down to it though the only number that matter is the number "one."
Friday I closed out the 11th Annual California Workers' Comp Forum in San Diego with my presentation on National Trends in Workers' Compensation.
I threw around a lot of numbers, and was surprised I didn't see many glazed eyes as these numbers got supplanted with even more numbers in my race to get everything I wanted to say out in an hour.
But I failed to conclude with the most important number - "one."
When I arrived at Los Angeles International Airport last Tuesday evening from South Carolina, I walked behind a man and a woman making their way methodically down to baggage claim. Since I was behind them, there didn't appear to be anything extraordinary about them though I did notice that the woman seemed to be guiding the man.
I took this initially as just a couple paying special attention to each other.
Then we got to an escalator and the woman was instructing the man when to step onto the moving steps and that's when I realized that the man was blind.
He didn't have the white cane with a red tip, and he wasn't wearing black glasses - there were no clues other than the fact that the woman was helping him navigate.
And frankly I didn't think much of it at the time. They went their way and I went my way, until we ran into each other at the men's room in the baggage claim area.
Obviously the woman was not going to go into the men's room and she let the man go there on his own.
Except he didn't know where he was going - it was very, very obvious that he needed some assistance.
So I grasped his left elbow, told him I would guide him to the urinal and helped him feel where the porcelain and flush unit were. And as I was next to him also performing the necessary biological function - we shared some small chatter. I told him I would wait to help him find the sink to wash up, and then help him back out.
He was a number "one."
As you can imagine, there were a lot of people in the airport at the time, and it seemed that no one paid any attention to the blind man and his friend except to visually express some irritation that they weren't moving along as quickly as the rest.
I sort of see these other people as all of the numbers that get measured - all sorts of demographics and other information can be derived from these numbers.
But "one" - that's where the rubber meets the road, so to speak.
It's a challenge remembering that "one." We don't have much time because all of the other numbers take up a lot of space in our brains, our calendars, our emotions and intellect.
When we work a file, there is a "one" at the center of that file. Sometimes we ascribe a greater value to that "one" and sometimes less.
Sometimes a lot of "ones" are grouped together, and that's when we get statistics.
When we look at our industry and see the numbers, remember that all of those numbers started with "one."
In claims we measure costs and time, and we break these measurements down into industry nomenclature that is puzzling to most such as "frequency" and "severity."
We measure "loss costs" and we can determine "combined ratios." Numbers are good because they make it easy to quantify our actions, or inactions. Anytime something happens in workers' compensation our deeply rooted nature is to give it a number.
We have file numbers, claim numbers, policy numbers, statute and regulation numbers.
Numbers help define workers' compensation.
Numbers make it relatively easy to understand how much a given claim is going to cost (that's called "reserving" in the claims department). And it's not that difficult to estimate how many injuries are going to occur over any given period of time for any particular occupation or industry.
People are trained to put together all sorts of numbers to determine how much a law change is going to affect the financials of the industry.
Still other people are trained in "data analytics", which is basically big number crunching to determine what sort of trends these numbers portend.
Knowing this information helps professionals determine if something is amiss because historical trends provide some basis upon which to determine future action.
But a lot of times these measurements get in the way of understanding what is really going on.
When we really get down to it though the only number that matter is the number "one."
Friday I closed out the 11th Annual California Workers' Comp Forum in San Diego with my presentation on National Trends in Workers' Compensation.
I threw around a lot of numbers, and was surprised I didn't see many glazed eyes as these numbers got supplanted with even more numbers in my race to get everything I wanted to say out in an hour.
But I failed to conclude with the most important number - "one."
When I arrived at Los Angeles International Airport last Tuesday evening from South Carolina, I walked behind a man and a woman making their way methodically down to baggage claim. Since I was behind them, there didn't appear to be anything extraordinary about them though I did notice that the woman seemed to be guiding the man.
I took this initially as just a couple paying special attention to each other.
Then we got to an escalator and the woman was instructing the man when to step onto the moving steps and that's when I realized that the man was blind.
He didn't have the white cane with a red tip, and he wasn't wearing black glasses - there were no clues other than the fact that the woman was helping him navigate.
And frankly I didn't think much of it at the time. They went their way and I went my way, until we ran into each other at the men's room in the baggage claim area.
Obviously the woman was not going to go into the men's room and she let the man go there on his own.
Except he didn't know where he was going - it was very, very obvious that he needed some assistance.
So I grasped his left elbow, told him I would guide him to the urinal and helped him feel where the porcelain and flush unit were. And as I was next to him also performing the necessary biological function - we shared some small chatter. I told him I would wait to help him find the sink to wash up, and then help him back out.
He was a number "one."
As you can imagine, there were a lot of people in the airport at the time, and it seemed that no one paid any attention to the blind man and his friend except to visually express some irritation that they weren't moving along as quickly as the rest.
I sort of see these other people as all of the numbers that get measured - all sorts of demographics and other information can be derived from these numbers.
But "one" - that's where the rubber meets the road, so to speak.
It's a challenge remembering that "one." We don't have much time because all of the other numbers take up a lot of space in our brains, our calendars, our emotions and intellect.
When we work a file, there is a "one" at the center of that file. Sometimes we ascribe a greater value to that "one" and sometimes less.
Sometimes a lot of "ones" are grouped together, and that's when we get statistics.
When we look at our industry and see the numbers, remember that all of those numbers started with "one."
Friday, October 25, 2013
IMR: Frontal Lobe Required
What's interesting about the discussion regarding the unexpectedly large number of Independent Medical Review requests is that it is so singular; that the vendors/providers need to learn a lesson.
Alex Swedlow, president of the California Workers' Compensation Institute, said at the California Workers' Compensation Forum in San Diego (where I'll be presenting this afternoon on national trends) that there could be an average of 150,000 IMR requests a year if the current trend continues.
At $500 per IMR (not accounting for administrative costs, delay costs, etc.), that's $75 million per year...
Swedlow said that 26.9% of magnetic resonance imaging scans and computed tomography scans that were denied in utilization review are being challenged at IMR, and that the cost of denying these MRIs and CT scans through utilization review and defending them in IMR is beginning to outweigh the cost of simply paying for them.
He commented that the cost of IMR has many claims administrators hoping that there will be a "learning curve" among providers that would cause the number of IMR requests to decline.
And Christine Baker, director of the California Department of Industrial Relations, said the agency does not know whether the initial spike in IMR requests is the result of an intentional effort, but will attempt to find out.
As I commented earlier, of course all of these IMR requests are intentional - in litigated cases applicant attorneys are not going to risk malpractice by blowing a statutory deadline when the cost of the appeals process is entirely born by the defense.
It's a no-brainer. This is called malpractice protection.
Baker noted that some IMR requests are for unusually small amounts, which she attributed to overaggressive adjusters who were too quick to deny treatment.
"We had some cases of Salonpas pads rejected that were $15, go onto IMR for $500," she said. "In that sense, we really need to be careful and provide the care and request when needed."
Likely that is not overaggressive adjusters too quick to deny treatment, but simply the product of some automated processes that have not been tuned yet to account for smaller bills.
See - it's not just the providers that have to learn a new system. Those who approve the requests and pay the bills also have to go through a "learning curve."
People would like workers' compensation to be self executing with no frontal lobe activity necessary for the system to work. That isn't going to happen.
Real live people need to use their knowledge, experience and training to make qualified decisions about treatment requests at some point in time.
Sure, most people would rather defer the decision or delegate the responsibility so they are not to blame, but someone along the life of a request must actually compare the cost versus the benefit, and make a decision accordingly.
Because the IMR process inadvertently has generated motivations due to the cost and time frames applicable.
In a year or so I would expect the workers' compensation think tanks to tell us what procedures are costing more as a consequence of IMR, and what procedures have declined and/or costing less.
In the end I wouldn't expect IMR to save any net money. IMR's behavior modification rules will simply result in an internal cost shift mechanism.
Mark Webb, vice president and general counsel of the Pacific Compensation Insurance Company, said that group health insurers overcame their initial struggles with IMR to allow doctors to advocate for their patients, saying that UR practices will need to change.
"To me, that is a different dynamic that over time, could frustrate IMR if . . . we continue to do utilization review the way we have done it before," Webb said. "It should be sobering that in August there were 15,000 requests for independent medical review. That suggests that there is an issue on both sides of that dynamic."
I've said it before, and I'll say it again: The ONLY way to avoid the cost of IMR is to avoid UR in the first place.
Webb has it right - utilization review processes will need to change if IMR is actually going to work.
***********POST SCRIPT***********
Alex Swedlow offered this correction to the statements attributed to him:
Alex Swedlow, president of the California Workers' Compensation Institute, said at the California Workers' Compensation Forum in San Diego (where I'll be presenting this afternoon on national trends) that there could be an average of 150,000 IMR requests a year if the current trend continues.
At $500 per IMR (not accounting for administrative costs, delay costs, etc.), that's $75 million per year...
Swedlow said that 26.9% of magnetic resonance imaging scans and computed tomography scans that were denied in utilization review are being challenged at IMR, and that the cost of denying these MRIs and CT scans through utilization review and defending them in IMR is beginning to outweigh the cost of simply paying for them.
He commented that the cost of IMR has many claims administrators hoping that there will be a "learning curve" among providers that would cause the number of IMR requests to decline.
And Christine Baker, director of the California Department of Industrial Relations, said the agency does not know whether the initial spike in IMR requests is the result of an intentional effort, but will attempt to find out.
As I commented earlier, of course all of these IMR requests are intentional - in litigated cases applicant attorneys are not going to risk malpractice by blowing a statutory deadline when the cost of the appeals process is entirely born by the defense.
It's a no-brainer. This is called malpractice protection.
Baker noted that some IMR requests are for unusually small amounts, which she attributed to overaggressive adjusters who were too quick to deny treatment.
"We had some cases of Salonpas pads rejected that were $15, go onto IMR for $500," she said. "In that sense, we really need to be careful and provide the care and request when needed."
Likely that is not overaggressive adjusters too quick to deny treatment, but simply the product of some automated processes that have not been tuned yet to account for smaller bills.
See - it's not just the providers that have to learn a new system. Those who approve the requests and pay the bills also have to go through a "learning curve."
People would like workers' compensation to be self executing with no frontal lobe activity necessary for the system to work. That isn't going to happen.
Real live people need to use their knowledge, experience and training to make qualified decisions about treatment requests at some point in time.
Sure, most people would rather defer the decision or delegate the responsibility so they are not to blame, but someone along the life of a request must actually compare the cost versus the benefit, and make a decision accordingly.
It's less expensive if this occurs on the "front end" - when the request first gets to the actual claim administrator.
The cost of IMR will cause a "learning curve" among claims administrators who ultimately will just pay such bills which will help cause the number of IMR requests to decline.
And vendors/providers will need to go through the "learning curve" to better understand what will, and what won't make it to IMR and/or ultimate approval.
In other words, both will work together to reduce IMR requests as both sides of the equation go through the "learning curve."
The reality of all of these exercises is that at some point there will be procedures that won't warrant IMR, and the payers will just wholesale approve those items.
And guess what, the providers will start wholesale requesting those items.
The cost of IMR will cause a "learning curve" among claims administrators who ultimately will just pay such bills which will help cause the number of IMR requests to decline.
And vendors/providers will need to go through the "learning curve" to better understand what will, and what won't make it to IMR and/or ultimate approval.
In other words, both will work together to reduce IMR requests as both sides of the equation go through the "learning curve."
The reality of all of these exercises is that at some point there will be procedures that won't warrant IMR, and the payers will just wholesale approve those items.
And guess what, the providers will start wholesale requesting those items.
Because the IMR process inadvertently has generated motivations due to the cost and time frames applicable.
In a year or so I would expect the workers' compensation think tanks to tell us what procedures are costing more as a consequence of IMR, and what procedures have declined and/or costing less.
In the end I wouldn't expect IMR to save any net money. IMR's behavior modification rules will simply result in an internal cost shift mechanism.
Mark Webb, vice president and general counsel of the Pacific Compensation Insurance Company, said that group health insurers overcame their initial struggles with IMR to allow doctors to advocate for their patients, saying that UR practices will need to change.
"To me, that is a different dynamic that over time, could frustrate IMR if . . . we continue to do utilization review the way we have done it before," Webb said. "It should be sobering that in August there were 15,000 requests for independent medical review. That suggests that there is an issue on both sides of that dynamic."
I've said it before, and I'll say it again: The ONLY way to avoid the cost of IMR is to avoid UR in the first place.
Webb has it right - utilization review processes will need to change if IMR is actually going to work.
***********POST SCRIPT***********
Alex Swedlow offered this correction to the statements attributed to him:
I want to point out that your blog entry on my statement during the presentation, "Initial data shows that 26.9% of magnetic resonance imaging scans and computed tomography scans that were denied in utilization review are being challenged at IMR, he said." was not what I had said nor was it what the accompanying graphic depicted. (I've attached the IMR slides from my presentation for your review.) Our pending study looks at the distribution of types of services that went through pre-863 UR and post 863 IMR, not the hand off between cases that have moved through UR into IMR. We won't be able to develop a critical mass of that kind of data for another 6 months. Our UR database is for 2010-11 decisions. My comment is that our IMR database (from 2013 decisions) shows that 26.9% of decisions are for MRI/CT scans. Our UR database shows MRI/CT scans make up 9.1% of reviews. So MRI's are taking up a much larger proportion of IMR review time than general UR reviews.
Thursday, October 24, 2013
Why Equity Likes Comp
The common thinking when big money private equity moves into workers' compensation is that they are either trying to diversify portfolios to minimize risk exposure to other health care related investments or that they see profit in being able to deliver more efficiency to service delivery.
But these altruistic notions ignore the basic premise behind PE investment in my experience: short term profit regardless of obstacles.
Pharmacy benefit managers Progressive Medical and PMSI announced Wednesday that they have finalized their merger.
The deal will see H.I.G. Capital, a private equity firm, sell its interest in PMSI to private equity funds managed by Kelso & Co. and StoneRiver Group, the controlling shareholder of Progressive Medical.
According to Joe Paduda, managed care consultant and industry observer, this merger will create the largest pharmacy benefit management company in the industry with a market share of 30% to 35%.
Paduda had also blogged that MedRisk, a managed-care organization, purchased MDIA, a medical-imaging company. Paduda said that the move will allow the new entity to challenge industry leader One Call Care Management for market dominance in their sector.
In addition to these deals, other acquisitions and mergers have been happening in the past 12 months that indicate interest in workers' compensation by Big Private Equity.
KKR & Co bought Mitchell International's software business on Sept. 5. In 2012. Healthcare Solutions acquired ScripNet. One Call Care Management last year announced a deal that Reuters reported to be worth$1.5 billion to buy MSC Care Management. Harren Equity Partners closed a deal to buy MedLegal copy services earlier this year.
Some believe that these moves presage a fear in private equity firms who are vested in the health care space to diversify portfolios because of the uncertainty of the impact of the Affordable Care Act as it comes into play.
Some think that the profit motive of these companies is that based on taking advantage of basically archaic industries, reformulating the delivery of services to wring out efficiencies and profit as a consequence.
Still others believe that this money is chasing new opportunities in the consolidation of services across similar product/service lines in health care and workers' compensation.
I think that all of these arguments, while perhaps having some scintilla of accuracy, largely miss the big picture because there is a misunderstanding of private equity motivation:
Short Term Profit.
I am not a student of private equity, nor of Wall Street's ways, other than reading the Wall Street Journal every day and successfully acquiring an MBA some 17 years ago (and my interest area was marketing; finance was flummoxing to me).
And there is one theme that has constantly withstood the test of time whenever I have gone back to look at what private equity does and how they accomplish it.
There is a general formula and a short term time frame for BPE. The formula is to "purchase" a firm for an astoundingly high value, but that purchase is highly leveraged, and much of the purchase price gets tied up in an escrow account pending certain conditions and covenants.
The conditions and covenants that are contained in the purchase contracts usually are very difficult to fulfill which causes the escrow money to default back to the purchaser.
So a deal that would be worth, say, $100M on paper, after all is said and done may be worth net only half of that.
In the meantime there is management shake up, employee turn over, service interruption, and destruction of the base value upon which the business was built.
The pressure to continue with short term profit on a gutted platform is intense, and there typically is no new investment in the core of the purchased business.
I'm not saying this is the deal with the companies cited above, only that this is how money moves through The Street.
I don't believe that there is any altruism whatsoever by these firms to create a better system, or a better model or a better anything. There is no allegiance to workers' compensation or the social and economic benefits the system delivers.
And I'm not saying this is either bad or good for workers' compensation.
But it is validation that workers' compensation has a profit value to Big Money. It takes BM to move things and get action in work comp. At the same time BM can be debilitating by taking the focus away from the primary mission of the system.
Efficiency, diversification - these are just empty terms to describe another way in which people profit off of workers' compensation.
Let's just call these investment moves what they really are - complex deals calculated to derive short term profits by interests with no commitment to the long term health of the industry. Again, I'm not saying this is good or bad - it is just reality.
But these altruistic notions ignore the basic premise behind PE investment in my experience: short term profit regardless of obstacles.
Pharmacy benefit managers Progressive Medical and PMSI announced Wednesday that they have finalized their merger.
The deal will see H.I.G. Capital, a private equity firm, sell its interest in PMSI to private equity funds managed by Kelso & Co. and StoneRiver Group, the controlling shareholder of Progressive Medical.
According to Joe Paduda, managed care consultant and industry observer, this merger will create the largest pharmacy benefit management company in the industry with a market share of 30% to 35%.
Paduda had also blogged that MedRisk, a managed-care organization, purchased MDIA, a medical-imaging company. Paduda said that the move will allow the new entity to challenge industry leader One Call Care Management for market dominance in their sector.
In addition to these deals, other acquisitions and mergers have been happening in the past 12 months that indicate interest in workers' compensation by Big Private Equity.
KKR & Co bought Mitchell International's software business on Sept. 5. In 2012. Healthcare Solutions acquired ScripNet. One Call Care Management last year announced a deal that Reuters reported to be worth$1.5 billion to buy MSC Care Management. Harren Equity Partners closed a deal to buy MedLegal copy services earlier this year.
Some believe that these moves presage a fear in private equity firms who are vested in the health care space to diversify portfolios because of the uncertainty of the impact of the Affordable Care Act as it comes into play.
Some think that the profit motive of these companies is that based on taking advantage of basically archaic industries, reformulating the delivery of services to wring out efficiencies and profit as a consequence.
Still others believe that this money is chasing new opportunities in the consolidation of services across similar product/service lines in health care and workers' compensation.
I think that all of these arguments, while perhaps having some scintilla of accuracy, largely miss the big picture because there is a misunderstanding of private equity motivation:
Short Term Profit.
I am not a student of private equity, nor of Wall Street's ways, other than reading the Wall Street Journal every day and successfully acquiring an MBA some 17 years ago (and my interest area was marketing; finance was flummoxing to me).
And there is one theme that has constantly withstood the test of time whenever I have gone back to look at what private equity does and how they accomplish it.
There is a general formula and a short term time frame for BPE. The formula is to "purchase" a firm for an astoundingly high value, but that purchase is highly leveraged, and much of the purchase price gets tied up in an escrow account pending certain conditions and covenants.
The conditions and covenants that are contained in the purchase contracts usually are very difficult to fulfill which causes the escrow money to default back to the purchaser.
So a deal that would be worth, say, $100M on paper, after all is said and done may be worth net only half of that.
In the meantime there is management shake up, employee turn over, service interruption, and destruction of the base value upon which the business was built.
The pressure to continue with short term profit on a gutted platform is intense, and there typically is no new investment in the core of the purchased business.
I'm not saying this is the deal with the companies cited above, only that this is how money moves through The Street.
I don't believe that there is any altruism whatsoever by these firms to create a better system, or a better model or a better anything. There is no allegiance to workers' compensation or the social and economic benefits the system delivers.
And I'm not saying this is either bad or good for workers' compensation.
But it is validation that workers' compensation has a profit value to Big Money. It takes BM to move things and get action in work comp. At the same time BM can be debilitating by taking the focus away from the primary mission of the system.
Efficiency, diversification - these are just empty terms to describe another way in which people profit off of workers' compensation.
Let's just call these investment moves what they really are - complex deals calculated to derive short term profits by interests with no commitment to the long term health of the industry. Again, I'm not saying this is good or bad - it is just reality.
Wednesday, October 23, 2013
Safety of Flight
The best laid plans with the most inscrutable strategy can still fail.
That maxim came to haunt me on my return from South Carolina after our jet had pushed away from the gate. I thought we were sitting a bit too long with out further action and sure enough the captain's voice announced over the intercom that maintenance would have to be called.
No big deal, I thought. That's aviation - things happen with machines and they'll get 'er fixed and we'll be off in no time; perhaps a bit late for the connecting flight to cause some stress but we'll get there.
Then we sat a bit too long, long enough for me to think that perhaps this was a maintenance issue that could not be resolved so easily or quickly.
Just about then the captain came over the intercom again to announce that we would have to go back to the gate - seems a generator in one of the engines decided to quit.
Generators quit all the time in airplanes. I know, I've had them quit on me! When that spinning little electrical master quits it's only a few moments before the batteries drain, threatening the safety of flight because then there's no electricity.
Of course this was at 7 a.m. ET, so there was no mechanic on the field, and the qualified mechanic was going to be another hour, and perhaps another hour after that before the plane was repaired, assuming the correct part was available, which, because this is aviation, it would not be so available - that's how things go.
So back to the terminal we all went to find alternative flights which is not very easy out of Myrtle Beach in the off season!
Ultimately I got booked onto a United regional flight to Newark, NJ where I would catch a big Boeing 757 to cross the country in and arrive in Los Angeles four hours after I had planned just in time for rush hour traffic (and this was the best of the alternatives, the others putting me eight and ten hours later).
The California Workers' Compensation Insurance Rating Bureau dealt some of that sort of bad news to the industry the other day announcing that average pure premium rates were heading up another 8.7% because SB 853 was not having its intended effects - and that was assuming that lien armageddon withstood the injunctive challenge scheduled to be heard later this month.
The culprits were many, just like aviation gremlins: RVRBS, increased indemnity, lower investment returns - all sorts of issues conspiring to deny those who had hoped for some magical savings to occur.
But what's the true downside?
We still have a semblance of a workers' compensation system working. It's more complicated than when I started out - just like my flight from Myrtle Beach. And it's more expensive than originally planned (like my trip, turns out the wacky air fare structure we fly under turned my first class seat into coach class assuming there were any first class seats available, which there weren't).
But I eventually made it to LA, and I think eventually the journey under this massive reform will make it too, but not in the route planned or in the time planned.
We have seen this before and we'll see it again.
What is going to derail effectual workers' compensation is not whether there are "savings" in costs as a consequence of new law and regulation or new fee schedules or new anything.
What will derail this latest reform effort (and any reform effort) is the consistent imagination of those with inscrutable minds conning the system into unnecessary, unfounded and illogical services that are overpriced and don't deliver any value whatsoever.
On Monday I wrote about genetic testing that is creeping into our system. We know how this game works and it's just a matter of time before someone proves this up. Perpetrators behind the scheme find willing participants to refer unknowing patients in exchange for some payments. And generally it's not the doctors who are masterminds behind such nonsense but some under-world figure who will remain as anonymous as possible to escape the long arm of the law in order to perpetrate another scheme at some other time.
Every person who gets referred to these testing clinics likely don't even know why they are there - all they know is that a saliva sample gets taken, they see some "doctor" or some other figure head for a couple of minutes, and it doesn't cost them anything.
Attorneys get payola, doctors get payola, sometimes even claims adjusters will get payola.
The corruption can run deep.
The threat to the system is not that these likely illegal actions occur - the threat is that we then go about drafting more laws, more regulations, more paper to try and halt this activity.
And that never works.
Criminals love that sort of complexity because it helps them hide better. The more defined the rules are, the easier it is to plot and execute around them.
Yep, I made it home safely. Yep, I didn't arrive at the doorsteps until 8 hours after I had planned.
I did my job by sticking to the big plan. I had a deviation. It cost me some time but not much more money. And the travel day was more exhausting than it should have been. In the meantime I met some very interesting characters in my travels.
So it is with SB 863. It is what we have to work with. The key is that we don't get distracted by the noise of such folderol such as genetic testing. We have a job to do and that is to take care of those injured at work, get them real medical care and back to work, with a little money in their pockets for the inconvenience.
Of course this analogy is flawed - workers' compensation is not like the airline industry. But the point is that there is a destination and that things get in the way of comfortable travel. We make the best of what we are given to work with and hopefully safety of flight is not compromised while we deal with the elements that don't have society's best interests in mind.
That maxim came to haunt me on my return from South Carolina after our jet had pushed away from the gate. I thought we were sitting a bit too long with out further action and sure enough the captain's voice announced over the intercom that maintenance would have to be called.
No big deal, I thought. That's aviation - things happen with machines and they'll get 'er fixed and we'll be off in no time; perhaps a bit late for the connecting flight to cause some stress but we'll get there.
Then we sat a bit too long, long enough for me to think that perhaps this was a maintenance issue that could not be resolved so easily or quickly.
Just about then the captain came over the intercom again to announce that we would have to go back to the gate - seems a generator in one of the engines decided to quit.
Generators quit all the time in airplanes. I know, I've had them quit on me! When that spinning little electrical master quits it's only a few moments before the batteries drain, threatening the safety of flight because then there's no electricity.
Of course this was at 7 a.m. ET, so there was no mechanic on the field, and the qualified mechanic was going to be another hour, and perhaps another hour after that before the plane was repaired, assuming the correct part was available, which, because this is aviation, it would not be so available - that's how things go.
So back to the terminal we all went to find alternative flights which is not very easy out of Myrtle Beach in the off season!
Ultimately I got booked onto a United regional flight to Newark, NJ where I would catch a big Boeing 757 to cross the country in and arrive in Los Angeles four hours after I had planned just in time for rush hour traffic (and this was the best of the alternatives, the others putting me eight and ten hours later).
The California Workers' Compensation Insurance Rating Bureau dealt some of that sort of bad news to the industry the other day announcing that average pure premium rates were heading up another 8.7% because SB 853 was not having its intended effects - and that was assuming that lien armageddon withstood the injunctive challenge scheduled to be heard later this month.
The culprits were many, just like aviation gremlins: RVRBS, increased indemnity, lower investment returns - all sorts of issues conspiring to deny those who had hoped for some magical savings to occur.
But what's the true downside?
We still have a semblance of a workers' compensation system working. It's more complicated than when I started out - just like my flight from Myrtle Beach. And it's more expensive than originally planned (like my trip, turns out the wacky air fare structure we fly under turned my first class seat into coach class assuming there were any first class seats available, which there weren't).
But I eventually made it to LA, and I think eventually the journey under this massive reform will make it too, but not in the route planned or in the time planned.
We have seen this before and we'll see it again.
What is going to derail effectual workers' compensation is not whether there are "savings" in costs as a consequence of new law and regulation or new fee schedules or new anything.
What will derail this latest reform effort (and any reform effort) is the consistent imagination of those with inscrutable minds conning the system into unnecessary, unfounded and illogical services that are overpriced and don't deliver any value whatsoever.
On Monday I wrote about genetic testing that is creeping into our system. We know how this game works and it's just a matter of time before someone proves this up. Perpetrators behind the scheme find willing participants to refer unknowing patients in exchange for some payments. And generally it's not the doctors who are masterminds behind such nonsense but some under-world figure who will remain as anonymous as possible to escape the long arm of the law in order to perpetrate another scheme at some other time.
Every person who gets referred to these testing clinics likely don't even know why they are there - all they know is that a saliva sample gets taken, they see some "doctor" or some other figure head for a couple of minutes, and it doesn't cost them anything.
Attorneys get payola, doctors get payola, sometimes even claims adjusters will get payola.
The corruption can run deep.
The threat to the system is not that these likely illegal actions occur - the threat is that we then go about drafting more laws, more regulations, more paper to try and halt this activity.
And that never works.
Criminals love that sort of complexity because it helps them hide better. The more defined the rules are, the easier it is to plot and execute around them.
Yep, I made it home safely. Yep, I didn't arrive at the doorsteps until 8 hours after I had planned.
I did my job by sticking to the big plan. I had a deviation. It cost me some time but not much more money. And the travel day was more exhausting than it should have been. In the meantime I met some very interesting characters in my travels.
So it is with SB 863. It is what we have to work with. The key is that we don't get distracted by the noise of such folderol such as genetic testing. We have a job to do and that is to take care of those injured at work, get them real medical care and back to work, with a little money in their pockets for the inconvenience.
Of course this analogy is flawed - workers' compensation is not like the airline industry. But the point is that there is a destination and that things get in the way of comfortable travel. We make the best of what we are given to work with and hopefully safety of flight is not compromised while we deal with the elements that don't have society's best interests in mind.
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