Nancy Grover

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at

Pharmacy Cost Control

Proactive Measures Needed to Cut Costs

Employers must ensure that their networks comply with policies governing physician dispensing and compounded drug prescriptions.
By: | April 20, 2015 • 3 min read

Physician dispensing and compounded medications are major cost drivers of workers’ comp medical costs. But employers can take steps to control expenses and improve the safety of their injured workers, according to a recent report.

Marsh LLC’s Workers’ Compensation Center of Excellence’s report, Targeting Prescription Drugs to Decrease Workers’ Compensation Costs, identifies the financial and safety concerns of the two practices, and outlines actions employers can take.


“Prescription drug costs will likely continue to escalate for the foreseeable future,” according to the report. “But by making strong decisions about their claims administrators and pharmacy benefit managers and ensuring that networks comply with policies governing physician dispensing and compounded drug prescriptions, employers can help to control those costs and drive better overall workers’ compensation claims outcomes.”

Repackaged medications dispensed by physicians “can cost employers exorbitant sums,” the report states. It cites studies from the Workers Compensation Research Institute and the California Workers’ Compensation Institute showing costs were nearly 17 percent more in claims where there was at least one physician dispensed repackaged drug compared to those without. Also, the medications typically dispensed by physicians cost 60 percent to 300 percent more than the same drugs dispensed by a retail pharmacy.

Costs are not the only concern, though. The report says injured workers may be at risk by relying too much on physician-dispensed medications.

“Many injured workers have more than one doctor and these providers may not always be aware of every medication an injured worker may be taking for a work-related injury,” said Jennifer Kaburick, senior vice president for workers’ compensation product, compliance and strategic initiatives at Express Scripts. “That includes those prescriptions filled at pharmacies and other physicians’ offices.”

Compounding pharmacies also tend to inflate the price of their products, the report says. It notes that the average cost of the compounded version of the anti-inflammatory drug diclofenac was $770 compared to $46 for the commercially available alternative of the drug.

The report also cites safety concerns, noting the U.S. Food and Drug Administration does not test or approve these medications.

“Compounded drugs made using poor quality practices may be sub- or super potent, contaminated, or otherwise adulterated,” it quotes the FDA as writing. “Additional health risks include the possibility that patients will use ineffective compounded drugs instead of FDA-approved drugs that have been shown to be safe and effective.”

While a number of states have enacted reforms to address cost concerns of physician-dispensed and compounded medications, the effects may be questionable, according to the report. It advises employers to be proactive by:

Ensuring network compliance. Claims administrators and PBMs should have specific policies to limit physician dispensing and prescriptions involving compounded drugs such as requiring compounded prescriptions to be subject to prior authorization reviews routed to specialized teams of nurses or other trained claims management staff.

Educating key personnel to encourage injured workers to visit only in-network providers, if possible. Supervisors and managers, human resources personnel, and environmental, health, and safety professionals should be informed. Employees themselves should also be told about the dangers of physician dispensing.


Evaluating the PBM and claims administrator or TPA. Employers should select those with a shared focus on driving better outcomes rather than looking only at fixed or upfront costs. When building a PBM program, employers should consider several key features such as:

  • Retail and mail order options for prescriptions.
  • A generic conversion program with information provided to pharmacies and providers.
  • Clinical management and oversight with medication reviews by pharmacists and outreach to physicians to ensure medications are necessary, not duplicative, and don’t present potentially harmful interaction effects.
  • Formularies specific to workers’ comp that can be modified to address unique needs of certain classes of work.
  • Utilization management techniques, including methods to analyze program trends, critical claims, and prescribing patterns of physicians.
  • Fraud, waste, and abuse detection units that use analytics to identify and thoroughly investigate such cases.
Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at
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Workplace Wellness

Small Businesses Can Reap Benefits From Wellness Programs

A significant number of large employers are benefiting from wellness programs, but too many small employers are missing out on the potential savings.
By: | April 13, 2015 • 4 min read

Work site wellness programs have the potential to improve employees’ health and reduce the frequency of injuries and costs of workers’ comp. But while the vast majority of large employers offer such programs, fewer than one-third of small businesses provide them.


New evidence shows potential savings of $2.03 for every $1 invested in work site wellness programs. An ongoing study out of Colorado suggests small employers would implement such programs and their employees would participate and benefit from them if certain factors were met.

“Small businesses face significant barriers when considering work site wellness programs because they lack the money, time, and knowledge about how to implement them,” said Dr. Lee Newman, professor of environmental and occupational health at the Colorado School of Public Health at the CU Anschutz Medical Campus, and the study’s lead author. “We demonstrated that Colorado small businesses will adopt work site wellness programs if the program is provided free of charge and comes with advice on how to execute it. This study provides important on-the-ground insight into how to structure these programs.”

The article, Implementation of a Worksite Wellness Program Targeting Small Businesses: The Pinnacol Assurance Health Risk Management Study, was developed by researchers at the Colorado School of Public Health and published in the Journal of Occupational and Environmental Medicine. The large prospective, longitudinal case-control study sought to determine whether health promotion programs offered to small businesses help improve productivity and workers’ comp costs.

Pinnacol Assurance funded the study and worked with researchers from the Colorado School of Public Health. Trotter Wellness was the vendor for the health risk assessment and coaching services. The San Francisco-based Integrated Benefits Institute advised on measurement and process data.

The Study

More than 6,500 employees in 260 companies were included in the study. Pinnacol Assurance, the largest provider of workers’ comp insurance in Colorado, conducted “a first of its kind study to determine if worksite wellness could improve the health and productivity of Colorado employees, as well as workers’ compensation outcomes,” according to the study. Of the participating companies involved in the health risk management program, more than 70 percent continued it for more than one year with “97 percent reporting that worker wellness improves worker safety.”

Small businesses cite a variety of reasons for not implementing work site wellness programs such as costs, lack of employee interest, lack of management support, lack of program expertise, uncertain return on investment, and privacy concerns, according to the authors.

“In this study, we describe a group of small employers and their employees who participated in a single, health risk management program,” the study said. “The HRM program used in this study was designed to help employees identify and reduce specific health risks through healthier lifestyle choices. The primary objectives of the HRM program were to: 1) improve employees’ health profiles; 2) reduce workers’ compensation rates and costs; and 3) enhance productivity.


Employers that participated were given summary reports on employee needs, development of an action plan on the basis of employee health goals, ongoing feedback regarding employee participation and progress, educational content for distribution to employees, and advice on program enhancements. They also were provided with a formal report that included industry baseline comparisons and cohort reporting when applicable.

To entice participation, employers were actively recruited through insurance agents and HRM training sessions. It was provided at no direct cost to policyholders.

Once enrolled, the employers were provided with information on various dates for the program and instructions for accessing the employer web portal, which also included information on the rollout and implementation of the program. They also participated in an orientation conducted via webinar by Trotter Wellness or in-person by Pinnacol Assurance.

The study included only small businesses — those with fewer than 500 employees. It was conducted between 2010 and 2014.

The Results

The study identified the following health conditions among the 6,507 participating employees:

  • Overweight — 34.3 percent.
  • Obese — 25.6 percent.
  • Depression — approximately 20 percent.
  • Chronic conditions, including chronic fatigue, sleeping problems, headaches, arthritis, hypercholesterolemia, and hypertension — 15 percent or more.
  • Smoking — less than 17 percent.

Most employees classified their overall health as being very good (39.5 percent) or good (37.2 percent). There were 15.1 percent who said their health was excellent, 7.4 percent said fair, and 0.5 percent said they had poor health. Approximately 10 percent said they were sedentary with no significant exercise, and 4.3 percent said they did not consume fruits or vegetables on a daily basis.

Nearly all employers said they believed wellness is “an important aspect of improving workplace safety,” according to the study.

“We have demonstrated that Colorado small businesses are prepared to adopt worksite wellness programs, if the program is provided free of charge and are given company-specific advice in program design and execution,” the authors wrote. “The cohort’s self-reported health risks and disease rates suggest that there are opportunities to address important modifiable health risks in the small business workforce.”


The fact that the HRM program was “well established” and did not require “the investment of company resources into vetting various different HRM program options” were seen as key to the success of the program. The “extensive assistance provided” was also cited as important to attracting participation by small businesses.

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at
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Behavioral Safety

Safety Initiative Saves Millions

Safeway rebuilt its safety culture on a foundation of positive reinforcement, leading to savings in excess of $100 million.
By: | April 6, 2015 • 5 min read

Not long ago some of Safeway’s divisions had frequency rates ranging between 9.0 and 11.0 per 200,000 hours worked. Last year, the company’s stores averaged just over 4.0 with some in the 3s and even the 2s.

“We are not just outperforming our industry sector, but we outperformed OSHA expectations for our business,” said Ward Ching, vice president of risk management operations for Albertsons/Safeway, a newly combined organization purchased by Cerberus in January 2015. The question that everyone is asking is: “How did Safeway do this?”


The answer lies in the Safeway Culture of Safety initiative. Hired as an outside consultant, Ching introduced a framework that integrates behavioral safety into the Safeway business/retail execution model.

“The program lives in the space of enterprise risk management,” Ching explained. “It is, for all intents and purposes, a combination of behavior economics — the study of how price and incentives influence behaviors — and behavior safety, which focuses on identifying and quantifying the drivers of loss.”

Ching estimated that over the past four years the program has been credited with saving the company more than $100 million in direct costs.

The Framework

Most of the company’s efforts to reduce its workers’ comp and general liability costs had been to manage claims after the fact. The idea for the Culture of Safety was that preventing losses from occurring could significantly reduce costs, as well as improve worker productivity and engagement and help drive better retail execution in the stores.

In 2008-09, Ching and an internal Safeway team used various quantitative analyses and set a specific target frequency rate of 4.5 per 200,000 hours worked for all divisions and store departments.

Ward Ching, vice president of risk management operations, Albertsons/Safeway

Ward Ching, vice president of risk management operations, Albertsons/Safeway

The first step was to study the general culture of Safeway. As Ching explained, the safety program would need to work within the company’s core culture in order for it to be successful.

Based on survey work done with other organizations, Ching identified a number of “essential behavioral hypotheses” and tested them across 5 percent of the entire Safeway organization. “For six months, a colleague and I were focused at the store level,” he said. “I spent half an hour with them asking questions, testing the hypotheses.” They were reworked and became the core tenets of the initiative.

Part of the initiative was to create data transparency within the organization, which allows all stakeholders to see their frequency reduction performance against all divisions at the same time.

“We also identified the key behaviors that contribute to loss — not tasks, but behaviors,” Ching said. “By identifying the behaviors, you can begin to develop tools and approaches to positively modify them. More importantly, behaviors can be observed readily and the economic consequences of poor behavioral management can be calculated.”


Financial incentives were created for store leadership such as premium credits and chargebacks to influence behaviors that contribute to loss.

“A tool we imported from insurance underwriting was to calculate an experience modifier for all store managers,” Ching said. “The ex mod is used as a predictive indicator of risk management and safety performance at the store manager level.”

Additionally, Ching worked with outside consulting groups to develop a weighted average approach to frequency showing which divisions, districts, and individual stores contributed to the frequency. “We honed in on those stores that had the highest contributing factors to frequency, highest or negative, so we could allocate our resources into areas where it mattered most.”

Positive Reinforcement

A key aspect of the initiative is what Ching refers to as the positive observation approach. The idea was to have supervisors and employees observe each other in their work environments to identify and comment on those behaviors that contributed to a safe workplace and fulfilling customer experience.

“There is a form, and if they observe something going well — that is done right — they would observe it, write it down, and go to the person and say, ‘Thank you; what you did was right,’” Ching said. “This increases our productivity. It connects safety and the operations of the store.”

The company found that the positive observations created an overall positive experience in the store that was reflected in productivity and sales. While supervisors are limited to five positive observations per week, employees can do as many as they want for other employees.

“When we voluntarily got 28-30 percent of people in the store doing [the positive observations], frequency for workers’ comp and general liability went to zero and stayed there,” Ching said. “That’s the key. If you do your observations well and create a culture in the store where employees are engaged and positive, the behaviors that contribute to loss go away.”

The positive observations are the main thrust of the initiative, as well as a knowledge of what contributes to loss at each store. “For example, if you are in the deli and doing your huddle [in the morning], you might say, ‘Let’s be careful about our gloves and avoid sharp things,’” Ching said. “You’re reminding people of the behaviors up front, then giving them positive observations through the day.”


To create a similar program, a company must be able to understand its own culture and determine how to take the basic aspects of the program and implement them. There needs to be a correlation between safety and productivity in the workplace.

“I refer to safety as a pivot; if things are going well from a safety standpoint, chances are everything else in your business is going well. It’s a leading indicator of future performance,” Ching said. “We know from our workers’ comp experience that when frequency starts to spike, usually that business will be in serious trouble in six months or out of business.”

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at
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