FROM LEFT, Dan Reynolds, Heather Hornbrook, Michelle Weatherson, Elaine Vega and Jim Bankson.
California is famous in the workers’ compensation field for its cultural diversity and being a highly complex place to manage claims. It’s also well-known for its regulatory environment, in which sweeping legislative mandates strike the system like so many waves crashing on its famous beaches.
To get a first-hand account of the reforms and the innovations that make the California workers’ compensation environment so dynamic, Risk & Insurance® convened a roundtable discussion with four California-based claims executives in October.
The executives reported that the pace of regulatory change in California is as unceasing as advertised. But the discussion also picked up the threads of innovations at play in California, some of them borrowed from elsewhere, that are worth paying attention to.
According to Jim Bankson, president and founder of Northern Claims Management LLC, based in Santa Rosa, Calif., regulatory change in California happens so quickly one barely gets a chance to see how the last reform played out before the next one comes and wipes it away.
“It’s difficult to absorb the rules and regulations as they come out,” he said.
“At the company level it’s difficult to assimilate all of that and come up with a good working structure that both honors the law and provides our clients and injured workers the service that they need,” he said.
Another executive said those who manage claims in California have to be fast on their feet.
“We have to work really hard to stay out in front of these changes and make sure we have an appropriate solution to maximize the value of those changes,” said Elaine Vega, senior vice president, account management with Healthcare Solutions who is based outside of Sacramento.
But participants agreed that reforms that have been given a chance to stick have improved conditions. Reforms in 2004 that established medical provider networks in California worked, they said.
“MPNs have been very successful and the outcomes continue to be both positive and cost-effective,” said Michelle Weatherson, director, Claims Medical and Regulatory Division, with California’s State Fund, the largest of the four remaining state funds in the United States.
The State Fund’s medical provider network of almost 5,000 physicians has its own inherent challenges due to its size, but it functions well overall, Weatherson said.
Weatherson and others based in California can now look forward to another significant regulatory reform. On Oct. 6, Gov. Jerry Brown signed into law a drug formulary for the state’s workers’ compensation system.
Prescription drug costs still comprise a significant piece of the ever rising medical expenditures in workers’ comp claims, with addictive painkillers leading the way.
The California participants expressed admiration for the formulary that has been in place for years in Texas, and hope California is just as successful at controlling costs and protecting workers’ rights to get the medications they need.
“What we’ve seen for our clients in Texas is a dramatic decline in opioid and narcotic use,” said Healthcare Solution’s Vega.
But there will still be the issue of legacy claims, much older claims where an injured worker that’s been off work for months, even years, has an entrenched dependence on painkillers.
That won’t be so easy to end, said Heather Hornbrook, executive vice president, workers’ compensation with the TPA Athens Administrators, based in Concord, Calif.
“You can’t just say, ‘OK, we’re not going to pay for those anymore, go ahead and detox in your bathroom,’ ” she said.
“At the company level it’s difficult to assimilate all of that and come up with a good working structure that both honors the law and provides our clients and injured workers the service that they need.”
— Jim Bankson, President and Founder, Northern Claims Management LLC
“You may still have to pay for an expensive detox problem and even then some folks won’t go,” she said.
The State Fund’s Weatherson pointed to another aspect of regulation from Texas that she hopes to see better enforced in California, mandatory electronic billing by providers.
California has had it on the books for 10 years, but it’s not enforced with the firmness there that it is in Texas, she said.
“They have great adoption and everybody lines up,” she said of the approach of regulators in Texas.
“That’s a huge cost savings and efficiency that the entire industry could realize if they would just line up behind it,” she said.
Another reform passed in California years ago that the panel agreed could be much better utilized is the state’s carve-out option for collective bargaining units.
It’s well known that claims from the dangerous work performed by police officers, firefighters and other emergency responders can be very costly to public sector budgets; especially if those emergency responders are part of a collective bargaining unit.
According to Northern Claims’ Bankson, the arrangement has to be initiated by the union but requires the participation and cooperation of a number of stakeholders.
Under such a carve-out agreement, an employer can sidestep the frictional expense and other possible downsides of an appearance in front of the Workers’ Compensation Appeals Board by coming to an agreement with an organized workforce on treatment parameters, return to work expectations and any number of the factors that can impact the outcome of a claim and a worker’s successful return to work.
“I think it could be a real boon for the right client with the right employee population,” Bankson said.
But like many of the reforms passed in California, it remains under-utilized, he said.
The Talent Question
When the latest round of health care and health care insurance reform was launched by the administration of President Barack Obama several years ago, experts told Risk & Insurance® that more people being insured under a group health plan or through a public exchange would translate to a scarcity of providers, especially in workers’ compensation.
That appears to be coming true in California and in other parts of the country.
“A lot of the doctors are moving out of the workers’ compensation arena and into private practice,” Athens Administrators’ Hornbrook said.
“We’re having a harder time getting appointments for people,” she said.
It’s a given that delays in treating workers’ comp cases means poorer outcomes and higher expenses.
Another facet of the talent question that bears close attention is the difficulty in attracting qualified talent to work as claims managers. As the California executives noted, claims management isn’t some form of glorified data entry.
It requires knowledge and engagement to get the best results. Perhaps most of all it requires someone who is passionate about getting injured workers healthy and back to work.
Hornbrook and her company Athens Administrators have hit on a solution, she said.
Recognizing that young people will communicate more easily with someone their own age, Athens has a younger member of their human resources department attend campus job fairs.
A key selling point among millennials, as the segment of the population born between 1982 and 2004 is known, is appealing to their desire for a higher purpose, a way to make the world a better place.
“Young people want to make a difference in the world and she can sell that,” Hornbrook said.
That initial recruitment effort is augmented by volunteer staff mentors, who guide younger talent in their evolution from assistants to full-fledged claims examiners.
“That’s worked very, very well,” Hornbrook said.
“We’re on our third round now of doing this and it has been very, very successful,” she said.
She added that despite an environment where headhunters are looking for claims management talent on a daily basis, Athens has lost none of its new recruits.
“We do the right thing. We’re restoring lives and that’s resonated with me for 26 years.”
— Michelle Weatherson, Director, Claims Medical and Regulatory Division, California State Fund
“They’ve stayed,” she said.
Athens Administrators also plans to put on a claims school in the first quarter of 2016.
Healthcare Solutions’ Vega said her company has also made a point of finding ways to promote talent and keep people engaged.
The company gives top assistants the necessary training to allow them to become senior examiners.
The appeal to a higher purpose isn’t something that‘s limited to the millennials, the State Fund’s Weatherson said.
“I have been with this organization for 26 years and when I came in the mantra was, ‘Do the right thing’,” she said.
“We do the right thing. We’re restoring lives and that’s resonated with me for 26 years,” she said.
“There is a noble purpose behind what we do.”
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Healthcare Solutions. The editorial staff of Risk & Insurance had no role in its preparation.
Specialty Drugs Show No Signs of Slowing Down
A decade ago, high-cost specialty drugs were commonly referred to as “injectable drugs” and were used to treat conditions not typically covered in workers’ compensation, such as cancer, rheumatoid arthritis and multiple sclerosis.
“Today, however, new specialty drugs are emerging that will be used to treat other chronic and inflammatory conditions,” said Joe Boures, president and CEO of Healthcare Solutions, an Optum company providing specialized pharmacy benefit management services to the workers’ compensation market.
“Payers in the workers’ comp market are just beginning to feel the cost impact of greater utilization of these drugs, which come with expensive price tags.”
Specialty drugs are often manufactured using biologic rather than chemical methods, and they are no longer just administered by injections. New specialty drugs can also be inhaled or taken orally, likely contributing to the rise in their utilization.
“There isn’t a standard definition of specialty drugs, but they are generally defined as being complex to manufacture, costly, require specialty handling and distribution, and they are difficult for patients to take without ongoing clinical support or may require administration by a health care provider,” said Boures.
In 2014, more than a quarter of all new therapies that the FDA approved were through its biologics division. Biologics, and similar therapies, are representative of a future trend in prescription drug spend.
“As the fastest growing costs in health care today, specialty drugs have the potential to change the way prescription benefits are provided in the future,” said Jim Andrews, executive vice president of pharmacy for Healthcare Solutions.
Workers’ Compensation payers may not recognize how specialty drugs are affecting their drug spend.
Specialty drugs like Enbrel®, Humira® and Synvisc® can be processed in conjunction with other medical procedures and, therefore, not recognized by payers as a pharmacy expense.
This leaves payers with little visibility into the costs of these medications within their book of business and a lack of tools to control these costs.
Due to the high costs of specialty medications, special due diligence should be utilized when claimants receive these medications, up to and including utilization review, said Andrews.
“Healthcare Solutions recommends that claimants using specialty drugs are monitored for proper medication handling and that the medication is administered appropriately, as well as monitoring the claimant to determine whether the medication is having its desired results and if there are any side effects,” he said.
“At $1,000 per pill for some of these specialty medications, making sure a claimant can tolerate the side effects becomes vital to making sure the claimant achieves the desired outcomes.”
Hepatitis C drugs have made their way to the workers’ compensation market, largely through coverage of healthcare workers, who have exposure to the disease.
“Traditional drug treatments that began in the 1990’s had a success rate of 6% and costs ranging from $1,800 to over $88,000,” said Andrews.
“The new Hepatitis C specialty medications have a treatment success rate of 94-100%, but cost between $90,000 and $226,000.”
Although the new treatments include higher drug costs, the payer’s overall medical costs may actually decrease if the Hep C patient would have required a liver transplant as part of the course of treatment without the drugs.
While the release of new Hepatitis C medications in 2014 demonstrated the potential impact specialty medications can have on workers’ compensation payers, there are some specialty medications under development that target more common conditions in workers’ compensation.
Pfizer Inc. and Eli Lilly and Company are currently developing tanezumab, a new, non-narcotic medication to treat chronic pain, which is common in workers’ compensation claims.
Tanezumab has demonstrated benefits of reducing pain in clinical trials and may provide non-addictive pain relief to claimants in the future. This may change how pain management is treated in the future.
Healthcare Solutions has a specialty medication program that provides payers discounted rates and management oversight of claimants receiving specialty medications.
Through the paper bill process, Healthcare Solutions aids payers in identifying specialty drugs and works with adjusters and physicians to move claimants into the specialty network.
A central feature of the program is that claimants are assigned to a clinical pharmacist or a registered nurse with specialty pharmacy training for consistent care with one-on-one consultations and ongoing case management.
The program provides patients with education and counseling, guidance on symptoms related to their medical conditions and drug side effects, proactive intervention for medication non-adherence, and prospective refill reminder and follow-up calls.
“The goal is to improve patient outcomes and reduce total costs of care,” said Boures.
This article was produced by Healthcare Solutions and not the Risk & Insurance® editorial team.
The Tools of the Trade
Integrating medical management with pharmacy benefit management is the Holy Grail in workers’ compensation. But getting it right involves diligence, good team communication and robust controls over the costs of monitoring technology.
Risk managers in workers’ compensation can feel good about the fact that opioid use is declining slightly. But experts who gathered for a pharmacy risk management roundtable in Philadelphia in June pointed to a number of reasons why workers’ compensation professionals have more than enough work cut out for them going forward.
For one, although opioid use is declining, its abuse and overuse in legacy workers’ compensation claims is still very much a problem. An epidemic rages nationally, with prescription drug overdose deaths outpacing those from the abuse of heroin and cocaine combined.
In addition, increased use of compound medications and unregulated physician dispensing are resulting in price gouging and poor medical outcomes.
Although individual states are attempting to address the problem of physician dispensing of prescriptions in workers’ comp, there is no national prohibition against it: That despite substantial evidence that the practice can result in ruinous workers’ compensation medical bills and poor patient outcomes.
“The issue is that there isn’t enough formal evidence to indicate improved outcomes from the use of compounds or physician dispensed drugs, and there are also legitimate concerns with patient safety,” said roundtable participant Jim Andrews, executive vice president, pharmacy, for Duluth, Ga.-based pharmacy benefit manager Healthcare Solutions.
Andrews’ concerns were echoed by another roundtable participant, Dr. Jennifer Dragoun, Philadelphia-based vice president and chief medical officer with AmeriHealth Casualty.
“When we’re seeing worsening outcomes and increasing costs, that’s the worst possible combination of events,” Dr. Dragoun said.
Whereas two years ago, topical creams and other compounds with two to three medications in them were causing concern, now we’re seeing compounds with seven or more medicines in them.
How those medicines are interacting with one another, and in the case of a compound cream, how quickly they’re being absorbed by the patient, are unknowns that are creating undue health risks.
“These medicines haven’t been tested for that route of administration,” Dragoun said.
In other words, the compounds have not been reviewed or approved by the FDA.
Carol Valentic, vice president of cost containment and medical management with third-party administrator Broadspire, said her company’s approach to that issue is to send a letter to providers, through the company’s pharmacy benefit administrator, alerting them to the fact that compounds are not FDA-approved and could be dangerous.
Other roundtable participants said they employ utilization review of every prescribed compound medication. They’re finding that the inflation of the average wholesale price for prescriptions that pharmacy benefit managers are battling in the case of single medications is happening with compounds as well, to the surprise of probably no one.
“The cost of compounds is doubling every year,” Healthcare Solutions’ Andrews said.
Kim Clark, vice president of utilization management with Patriot Care Management Inc., a division of Patriot National, Inc., said Patriot has their own software, DecisionUR, and opioids as well as compound prescriptions can be directed from the PBM to utilization review.
In the area of new worries in workers’ compensation, and there are plenty of them. Dragoun also pointed to the introduction of extremely high cost, albeit extremely effective specialty medications, such as those being used to treat Hepatitis C. Treatments in this area can run into the hundreds of thousands of dollars.
Domestic drug manufacturers, pressed to pursue profits as their product lines mature and their margins level off, are jockeying for dominance in this area.
“This seems to be a route that a lot of drug makers are going after. Very narrow markets but with extremely high cost medications,” said Deborah Gleason, clinical resources manager, medical programs, with ESIS, Inc., the Philadelphia-based third-party administrator that is part of ACE Group.
Tools of the Trade
Given how substantially the use of prescriptions can balloon the cost of a workers’ compensation claim and undermine outcomes, a number of tools are on the market that can help risk managers rein in costs.
One is urine drug monitoring, which can catch cases of drug diversion, or instances where an injured worker is ingesting unprescribed substances. But the use of that test can create its own problems, namely overutilization.
ESIS’ Gleason and others use urine drug monitoring. But when the test is overused, say by being conducted every month instead of quarterly as is recommended, the members of the Philadelphia roundtable said its costs can outrun its usefulness.
Test results are frequently inconsistent, signaling that the injured workers aren’t taking the prescribed medication or are taking something they shouldn’t be. Drug testing shouldn’t be used in isolation but rather as a component of integrated medical management.
“What’s emerging today, and in some companies more prevalently, is the integration of managed care with pharmacy benefit management,” roundtable participant Valentic said.
“When we’re seeing worsening outcomes and increasing costs, that’s the worst possible combination of events.”
— Dr. Jennifer Dragoun, Vice President and Chief Medical Officer, AmeriHealth Casualty
In other words, it’s not enough to flag a script or pick up a urine drug monitoring test result. There needs to be a plan or a system in place that says what action should be taken with the patient once that information has been received.
Identifying a potential problem early and taking action on it is key, said ESIS’ Gleason. She added that the patient’s psychological state, including how they react to and perceive pain, is something that more risk practitioners should consider.
Obstacles to doing that, according to roundtable members, include a lack of awareness or acceptance of its possible advantages on the part of patients and physicians. After all, we’re talking about an assessment, a list of questions, that should take no more than 15 minutes to carry out.
If a treating physician or case manager doesn‘t conduct a psychological test but is still concerned about the potential for pain medication abuse, there is one key question they can ask an injured worker, according to AmeriHealth Casualty’s Dragoun.
“There is one question that predicts far more than any other attribute of a patient whether they are likely to abuse narcotics, and that is if they have a personal or family history of substance abuse,” Dragoun said.
“You know they may ask that about the patient, but I don’t know how many ask it about the family,” Patriot Care Management’s Kim Clark said.
Pharmacogenetic testing, that is testing an individual for how they might react to certain drugs or combinations of drugs, and not — let’s be clear about this — whether they are predisposed to addiction, is also entering the market.
But as is the case with urine drug monitoring, the use of pharmacogenetic testing is no cure-all and the cost of it needs to be carefully managed.
Some vendors are pitching that it be applied to every case in a payer’s portfolio. The roundtable participants in Philadelphia agreed that it should be used with far more discretion than that.
Regulating the Regulators
It’s a given in the insurance business and in workers’ compensation that regulators in all 50 states call the shots. There are few national laws that regulate the hazards faced by workers’ compensation risk managers and injured workers.
Having said that, is it really such a pipe dream to think that the federal government could step in and provide leadership in an area that is so prone to confusion, risk and self-serving behavior on the part of some vendors and medical practitioners?
If the Philadelphia roundtable as a group could point to one place where federal regulators could do some good it would be in the area of physician dispensing. Many states have enacted legislation to curb the practice, as there is no data to prove better outcomes, and regulation by the federal government would be of benefit, the Philadelphia roundtable concluded.
Another area would be to require FDA oversight for compounds.
“The minute you need to have FDA approval of a compound, that’s going to stop it,” Broadspire’s Valentic said.
It’s a notion worth considering. After all, lives are at stake here.
Given the lack of oversight from the federal government, the roundtable participants pointed to measures in a number of states that are worth emulating. The Texas closed formulary, which limits the range of medications that can be prescribed, is one example.
The requirement in the State of New York that a prescribing physician check a state registry — what’s known as a prescription drug monitoring program — to see whether a patient is already taking or has a prescription for a controlled substance, is another good example of a state government stepping in to ensure the safety of its residents.
“The minute you need to have FDA approval of a compound, that’s going to stop it.”
— Carol Valentic, Vice President of Cost Containment, Medical Management, Broadspire
Pennsylvania also earned praise from the roundtable for recently passing a measure limiting the amount of medication that a physician can dispense to an initial supply.
With different regulations in every state and with the average wholesale cost of prescriptions constantly on the rise, pharmacy benefit management is an art requiring constant vigilance.
“It’s not an original thought, but if you stop and think about all the things that are happening in society with the addictions and the costs, the cost of doing nothing is greater than the cost of doing something.
I think that’s why everybody is doing something,” Healthcare Solutions’ Andrews said.
For more information about Healthcare Solutions, please visit www.healthcaresolutions.com.
Opinions of the roundtable participants are the opinions of each individual contributor and are not necessarily reflective of their respective companies.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Healthcare Solutions. The editorial staff of Risk & Insurance had no role in its preparation.