Risk Insider: Jason Beans

Medicare Paves the Way

By: | April 12, 2016 • 2 min read
Jason Beans is the Founder and Chief Executive Officer of Rising Medical Solutions, a medical cost management firm. He has over 20 years of industry experience. He can be reached at [email protected]

While it’s uncommon to think of Medicare blazing a trail anywhere, it is certainly at the forefront of value-driven health care. As of January 1, 2016 the Centers for Medicare & Medicaid Services (CMS) deployed 10 alternative payment models that increasingly tie healthcare payments to value.

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With the ACA as a catalyst for change, Medicare is making assertive advances to replace the fee-for-service model we all know and love. Recent/upcoming activities include:

  • New Bundled Payment Plan for Joint Replacements – On April 1st, CMS launched its bundled payment initiative that’s designed to eliminate the significant geographic variance in reimbursements for inpatient total joint procedures.
  • First Set of Core Measures Used as Basis for Quality Payments – In February, CMS released seven sets of clinical quality measures to be used for value-based care.
  • Merit-Based Incentive Payment System (MIPS) – In January, CMS met its 2016 goal of shifting 30 percent of fee-for-service payments to value-based reimbursements; in 2018, they’re committing to 50 percent.
  • Physician Quality Reporting System (PQRS) Initiative – In 2017 physicians will receive negative payment adjustments for not satisfactorily reporting quality metrics to CMS.

One outcome of Medicare’s advancements that particularly caught my eye was reported by the Agency for Healthcare Research and Quality (AHRQ) in November 2015.

Their research indicates that hospital-acquired conditions (HAC’s) decreased 17 percent between 2010 and 2014, from 145 to 121 per 1,000 discharges, while readmission rates dropped 8 percent.

This resulted in an estimated 87,000 lives saved, and a cost reduction of $19.8 billion. These dramatic results occurred during a period of concerted effort by hospitals to reduce adverse events spurred by Medicare’s move toward value-based payment models.

Currently, the best fit for workers’ comp is Medicare’s Bundled Payment models, which set a single rate for services during an episode of care. This concept is certainly not unfamiliar to workers’ comp.

While these numbers certainly illustrate the business aspect of health care, more than that, they illuminate the striking financial and quality impact that value-based models can have on healthcare delivery.

Most compelling is that the 2010-2014 programs that drove these drastic improvements were largely Medicare’s pilot forays into value-based care.

Now that Medicare is fully implementing these programs, imagine the impact broader application could have in areas like workers’ comp.

At their foundation, value-driven models reward high quality and cost effective patient care. While Medicare has many models, there are four basic forms, three of which—Affordable Care Organizations (ACOs), Merit-Based Incentive Payment Systems (MIPS), and Capitated Rates—pose major obstacles for most workers’ comp payers today. All require significant patient volume to mitigate the providers’ risk and administrative burden, historical data and benchmarking efforts, and direction of care capabilities.

Currently, the best fit for workers’ comp is Medicare’s Bundled Payment models, which set a single rate for services during an episode of care. This concept is certainly not unfamiliar to workers’ comp.

The simplest (and oldest) model is DRGs, where hospitals are paid a flat rate for a diagnosis/procedure, regardless of treatment. We’ve also long seen case rates for physical therapy.

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Surgical episodes provide an ideal opportunity to employ bundled payments for all treatment associated with a given procedure. Other creative iterations of value-based payments could be used as well, such as the Ohio BWC’s program for knee injuries.

While there is no fast-track to value-based care in workers’ compensation, there are certainly steps we can and should take today. With Medicare paving the way through proven models and successful outcomes, it’s time we bring what’s working elsewhere into our world.

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Vermont Report 2016

The Future Is Now

Mid-size employers transitioning from fully insured health care plans are intrigued by stop-loss captives.
By: | April 4, 2016 • 6 min read
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The relationship between captive insurance and health care is decades old. And it is very robust in the captive domicile of Vermont, which added seven health care captives in 2015 and now houses 96 health care captives overall.

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Now the domicile is poised to take advantage of its regulatory expertise to house medical stop-loss captives, for which some insurance professionals see a bright future.

One of them is Mark Tabler, executive director of Genesis Re, a segregated cell medical stop-loss captive, which redomesticated from Arizona to Vermont in 2015.
(Tabler also launched a separate medical professional liability risk retention group, Innovative Physician Solutions, of which he is COO.)

Tabler, the former president of the Arizona Captive Insurance Association, said he has found his calling.

“Once I got into the captive industry through this organization, it was just exciting,” he said. “I wouldn’t want to be in anything else.”

Stop-loss captives are, in essence, a type of reinsurance that kicks in to cover employee health care costs above a certain limit. And they have a number of advantages, according to Tabler.

Steve Gransbury, president, Accident & Health, QBE North America

Steve Gransbury, president, Accident & Health, QBE North America

That’s especially true of the one he operates, he said.

Genesis Re is owned by TPA and benefits company SIHO Insurance Services, which has its own book of business, as well as managing a large number of administrative services only (ASO) contracts, so the company has a good understanding of how to manage the health of large populations of people, Tabler said.

By setting up its own captive, it is able to apply that expertise to finance and control its exposures — and recoup any savings gained from loss control.

Steve Gransbury, president, accident and health for QBE North America, is another supporter of the captive stop-loss option.

The benefits of stop-loss captives are manifold, he said, but the primary ones are control and transparency.

“For a group captive, there is control in how to approach risk with economies of scale not available to mid-sized employers who don’t participate in a group captive,” he said.

“For a single-parent captive, there is control over financing or predictable risk internally versus the commercial market.”

Because captive premiums are treated as ordinary business expenses, he continued, there are incentives for “greater risk, claim and reserving control,” not to mention to keep underwriting profit and maintain stable prices.

Not Loved by All

Medical stop-loss captives aren’t without opposition though.

Some regulators perceive stop-loss captives as instruments for side-stepping the provisions of the Affordable Care Act.

State legislators in Minnesota and Rhode Island, for instance, considered putting floors on deductibles or increasing the attachment points for stop-loss captives — the dollar limit amount at which stop-loss would kick in above primary health insurance.

California passed a law that limited stop-loss captives to employers with 100 or more workers.

In July 2013, the captive regulator in Washington, D.C. took an even stronger stand. Dana Sheppard, associate commissioner of the district’s Department of Insurance, Securities and Banking, declared:

“Washington, D.C. is not in favor of allowing small employers located in D.C. to self-insure their health care risks, including the establishment of medical stop-loss captives, if their motivation for doing so would result in removing young and healthy persons from the exchange, leaving older and less healthy employees in the exchange.”

Tabler’s captive avoids these concerns by having a high attachment point at $500,000, too rich for small employers.

“A few years ago, groups who were exploring and ‘tire kicking’ are now doing business. Our large group/single parent captive business continues to be very robust.” — Steve Gransbury, president, accident and health for QBE North America.

Another obstacle to stop-loss captive success, however, is how many employers, whether big or small, are actually interested in participating in them.

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The experience of one captive, the Central Coast Community Mutual Insurance Co., is cautionary.

Formed in 2011 by the Community Hospital of the Monterey Peninsula (CHMP), the group stop-loss captive has since been trying to recruit members — unsuccessfully.

As hospital CFO Laura Zehm admitted, the parent company is at a do-or-die point in 2016; if they still haven’t brought on additional employers (it currently just involves the hospital’s and one other employer’s employee populations), they will consider giving it up.

“We had interest, for sure,” she said of other employers’ attitudes to the stop-loss captive over the past few years. “We do get calls.”

But eventually employers are dissuaded by brokers who promise to find them cheaper coverage elsewhere. It does not help the captive’s case that the commercial stop-loss insurance market is “really soft.”

The CHMP captive has so much to offer beyond just its coverages though. As part of the captive’s offering, members can tap into the hospital’s physician networks.

Laura Zehm, CFO, Community Hospital of the Monterey Peninsula

Laura Zehm, CFO, Community Hospital of the Monterey Peninsula

Zehm’s captive has its own TPA, which collects data from claims and then analyzes the information and applies it for better patient care.

For instance, through data, they can spot when a patient would benefit from six months of physical therapy before having to get his back or neck operated on. Or maybe never have that surgery.

For its all-in effort this year, Zehm said, the captive also made improvements. It partnered with the brokerage Alliant to gain the broker’s buy-side understanding. Zehm asked Alliant: If we don’t have anything worth selling, let us know.

Alliant didn’t reject them but instead offered ways to better the captives’ offerings.

Since then, the captive lowered costs within its physician network and incentivized physicians to keep member employees healthy.

“We continue to learn how to do this,” Zehm said. “We’re fixing everything that might be a barrier.”

High Interest in Stop-Loss Captives

While Zehm and Tabler provide an on-the-ground perspective of the benefits and challenges of stop-loss captives, the 30,000-foot perspective is one of optimism.

“While interest still remains very high, we’re actually seeing more deals get done over the last couple of years. In particular, with mid-sized employers that are looking at transitioning to self-insurance from fully insured health plans,” said QBE’s Gransbury.

“A few years ago, groups who were exploring and ‘tire kicking’ are now doing business. Our large group/single parent captive business continues to be very robust.”

Gransbury said that post-ACA and the removal of annual and lifetime benefit maximums, large employers are buying stop-loss coverage with unlimited reimbursement benefits and using existing single-parent captives to finance certain layers.

“A few years ago, groups who were exploring and ‘tire kicking’ are now doing business. Our large group/single parent captive business continues to be very robust.” — Steve Gransbury, president, Accident & Health, QBE North America

Then again, with every Republican presidential candidate since the beginning of the 2016 election season declaring that he or she would repeal the ACA if elected, perhaps the issue of how employers can best finance their employee health care benefits is far from moot.

It’s going on eight years that we have heard about uncertainty around health care, but Tabler said people are still waiting to see what will happen to the ACA before they feel totally settled and comfortable in their health care benefits arrangement.

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Whatever happens this November, employers can rest assured that Vermont will continue to be a home for health-care-related captives.

On the whole, captive insurance will continue to serve as an alternative and extremely innovative approach, whether it’s for professional liability, stop-loss coverage or another health care-related exposure. &

The R&I Editorial Team may be reached at [email protected]
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Sponsored: Liberty Mutual Insurance

To Better Control Total Workers Comp Costs, Manage Physical Medicine

The time is ripe to consider physical medicine to better manage the total cost of risk.
By: | April 4, 2016 • 6 min read

Soaring drug prices get all the attention in the workers comp space. Meanwhile, another threat has flown under the radar.

More than 50 percent of lost time workers compensation claims involve physical medicine — an umbrella term encompassing physical therapy, occupational therapy, work conditioning, work hardening and functional capacity evaluation.

Spending on physical medicine accounts for 20 to 30 percent of total workers compensation medical costs, a percentage set only to increase in the coming years. Despite the rapid growth of this expense, very few employers are engaged in discussions around how best to manage it.

“Now is the time to take a look at physical medicine and think about how it impacts total cost of risk,” said Frank Radack, Vice President & Manager, Liberty Mutual Insurance, Commercial Insurance – Claims Managed Care. “Employers should investigate comprehensive solutions to keep costs manageable and to deliver quality, evidence-based care to injured employees.”

Liberty Mutual’s Frank Radack defines physical medicine and why it is so important in managing total workers compensation costs.

Cost Drivers

Upswings in both pure cost and utilization of physical medicine are driving the spending surge. State fee schedule changes are largely responsible for increases in cost. California, for example, has increased the cost of physical medicine services by 38 percent over the past two years, and will increase it a total of 64 percent by the end of 2017. North Carolina changed its approach to its fee schedule effective June 1, 2015, resulting in an almost 45 percent increase in the cost of the average physical therapy visit.

Increased utilization compounds rising prices. Low severity claims like soft tissue injuries typically involve physical therapy, especially when co-morbid conditions threaten to slow down recovery.

“When co-morbids are present, like obesity, more conditioning is necessary for recovery from injury,” Radack said. “With people staying in the workforce longer, we see these claims more often because these types of injuries and co-morbid conditions become more common as people age.”

De-emphasis on surgery also bolsters physical therapy prescribing as patients seek less invasive treatments that might enable a faster return to work, even in a light or transitional duty role. Sometimes, patients with a minor injury might seek out physical therapy on their own as a precaution after an injury or under the mistaken belief it will hasten recovery, even if evidence-based guidelines don’t call for it in every treatment plan.

LM_SponsoredContent“Now is the time to take a look at physical medicine and think about how it impacts total cost of risk. Employers should investigate comprehensive solutions to keep costs manageable and to deliver quality, evidence-based care to injured employees.”
–Frank Radack, Vice President & Manager, Liberty Mutual Insurance, Commercial Insurance – Claims Managed Care

“Without proper claims management procedures, some physicians might be inclined to prescribe physical therapy as a palliative measure, even when it doesn’t provide much benefit to the patient,” Radack said.

Building Solutions

Brokers and buyers may not be able to do much about fee schedule changes, but they can partner with an insurer that better manages utilization through a multi-faceted claims system, qualified network vendors, data analytics, and peer interventions.

The keys to better managing the soaring cost of physical medicine.

“There is an opportunity to move physical medicine spending into network solutions and partnerships,” Radack said. A strong, collaborative network is key to maintaining direction over treatment decisions.

Liberty Mutual uses a proprietary data analytics program to study its providers’ prescribing and referral patterns and their outcomes. It then builds a network of point-of-entry general practitioners with a proven track record of optimal outcomes.

“The treating physician is a gatekeeper to other services, so it’s important to start there in terms of establishing a plan and making sure evidence based guidelines are followed,” Radack said.

Radack and his team use similar data analysis and partnerships to deploy networks pertaining only to physical medicine, so it can identify physical therapists who understand the occupational space and are focused on effective Return-to-Work (RTW). A provider who doesn’t understand RTW, or even know that the employer of an injured worker has a modified RTW program, may over-utilize PT. Getting employees with soft tissue injuries back into the work place is critical for delivering the best possible medical outcome and a timely recovery.

These therapists know the value of adjusting a treatment plan based on a patient’s progress, which often cuts unnecessary appointments and therapies.

“Our data analytics program is built internally by people who are aligned with the claims organization,” Radack said. “These insights drive our ability to shape networks and direct injured workers to providers with proven outcomes.”

Peer-to-peer interventions also play a big role in adjusting provider behavior and ensuring adherence to evidence-based guidelines. Liberty Mutual’s in house regional medical directors can bring their expertise to bear on challenging claims and discuss how to redirect treatment to meet these guidelines. Liberty Mutual also partners with experts to build networks of physical medicine and physical therapy providers who deliver quality outcomes cost-effectively and to asses a patient’s progress, working with providers to identify and resolve treatment issues.

Sharing information and measuring performance in these settings helps to change the environment around physical medical care. For example, interventions that steer physical therapists back to  established, evidence-based medical treatment guidelines often reduce the use of passive therapy treatments, like hot and cold packs, which are not as effective and can slow down recovery.

“Active therapies that get people moving often help them get them back to work faster and at a lower cost,” Radack said. Utilization review also helps to identify unnecessary treatments and signals the insurer to communicate evidenced-based expectations with the therapist or prescribing physician.

Solutions in Action

Physical therapy offers great value in spite of rising prices — but only if it’s managed carefully.

An example of the benefits of managing physical medicine.

Take for example the case of a worker with a shoulder injury. In an unmanaged situation, a physical therapist may prescribe 12 appointments, and the injured worker will go through all 12 sessions with no pre-approval of the treatment plan and no interim checkup.

In a managed situation, the physical therapist may only prescribe eight sessions, because she understands the benefits of a faster return to work and sees that guidelines don’t dictate a full 12 sessions for this injury. Halfway through the eight sessions, she checks in on the patient’s progress and determines that only two more sessions are necessary given the recovery and the medical guidelines; and so adjusts the treatment plan to a total of six sessions.

In this scenario, managed care saves the cost of six sessions over the unmanaged situation, and the employee gets back to work faster with a healthy shoulder.

Ultimately, workers comp buyers can achieve cost savings by making treatment decisions that optimize patient outcomes, rather than cut pure cost. To achieve that, every player — point-of-entry physicians, physical therapists, medical directors, claims managers and patients — need to shoot for the common goal of shortening recovery time by following evidence-based medical guidelines.

“When medical experts and network vendors work in concert with each other, along with data analytics and research to back them up, we can drive down utilization while improving outcomes,” Radack said. “All of these working parts together are the solution to managing physical medicine costs.”

To learn more about Liberty Mutual’s Workers Compensation solutions, visit https://www.libertymutualgroup.com/business-insurance/business-insurance-coverages/workers-compensation

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.




 

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Liberty Mutual Insurance offers a wide range of insurance products and services, including general liability, property, commercial automobile, excess casualty, workers compensation and group benefits.
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