Proactive Measures Needed to Cut Costs
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.
Small Businesses Can Reap Benefits From Wellness Programs
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.
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 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.
Healthcare: The Hardest Job in Risk Management
Radically changing cost and reimbursement models.
Rapidly evolving service delivery approaches.
It is difficult to imagine an industry more complex and uncertain than healthcare. Providers are being forced to lower costs and improve efficiencies on a scale that is almost beyond imagination. At the same time, quality of care must remain high.
After all, this is more than just a business.
The pressure on risk managers, brokers and CFOs is intense. If navigating these challenges wasn’t stress inducing enough, these professionals also need to ensure continued profitability.
“Healthcare companies don’t hide the fact that they’re looking to reduce costs and improve efficiencies in practically every facet of their business. Insurance purchasing and financing are high on that list,” said Leo Carroll, who heads the healthcare professional liability underwriting unit for Berkshire Hathaway Specialty Insurance.
But it’s about a lot more than just price. The complexity of the healthcare system and unique footprint of each provider requires customized solutions that can reduce risk, minimize losses and improve efficiencies.
“Each provider is faced with a different set of challenges. Therefore, our approach is to carefully listen to the needs of each client and respond with a creative proposal that often requires great flexibility on the part of our team,” explained Carroll.
Creativity? Flexibility? Those are not terms often used to describe an insurance carrier. But BHSI Healthcare is a new type of insurer.
The Foundation: Financial Strength
Berkshire Hathaway is synonymous with financial strength. Leveraging the company’s well-capitalized balance sheet provides BHSI with unmatched capabilities to take on substantial risks in a sustainable way.
For one, BHSI is the highest rated paper available to healthcare providers. Given the severity of risks faced by the industry, this is a very important attribute.
But BHSI operationalizes its balance sheet in many ways beyond just strong financial ratings.
For example, BHSI has never relied on reinsurance. Without the need to manage those relationships, BHSI is able to eliminate a significant amount of overhead. The result is an industry leading expense ratio and the ability to pass on savings to clients.
“The impact of operationalizing our balance sheet is remarkable. We don’t impose our business needs on our clients. Our financial strength provides us the freedom to genuinely listen to our clients and propose unique, creative solutions,” Carroll said.
Keeping Things Simple
Healthcare professional liability policy language is often bloated and difficult to decipher. Insurers are attempting to tackle complex, evolving issues and account for a broad range of scenarios and contingencies. The result often confuses and contradicts.
Carroll said BHSI strives to be as simple and straightforward as possible with policy language across all lines of business. It comes down to making it easy and transparent to do business with BHSI.
“Our goal is to be as straightforward as we can and at the same time provide coverage that’s meaningful and addresses the exposures our customers need addressed,” Carroll said.
Claims: More Than an After Thought
Complex litigation is an unfortunate fact of life for large healthcare customers. Carroll, who began his insurance career in medical claims management, understands how important complex claims management is to the BHSI value proposition.
In fact, “claims management is so critical to customers, that BHSI Claims contributes to all aspects of its operations – from product development through risk analysis, servicing and claims resolution,” said Robert Romeo, head of Healthcare and Casualty Claims.
And as part of the focus on building long-term relationships, BHSI has made it a priority to introduce customers to the claims team as early as possible and before a claim is made on a policy.
“Being so closely aligned automatically delivers efficiency and simplicity in the way we work,” explained Carroll. “We have a common understanding of our forms, endorsements and coverage, so there is less opportunity for disagreement or misunderstanding between what our underwriters wrote and how our claims professionals interpret it.”
Responding To Ebola: Creativity + Flexibility
The recent Ebola outbreak provided a prime example of BHSI Healthcare’s customer-centric approach in action.
Almost immediately, many healthcare systems recognized the need to improve their infectious disease management protocols. The urgency intensified after several nurses who treated Ebola patients were themselves infected.
BHSI Healthcare was uniquely positioned to rapidly respond. Carroll and his team approached several of their clients who were widely recognized as the leading infectious disease management institutions. With the help of these institutions, BHSI was able to compile tools, checklists, libraries and other materials.
These best practices were immediately made available to all BHSI Healthcare clients who leveraged the information to improve their operations.
At the same time, healthcare providers were at risk of multiple exposures associated with the evolving Ebola situation. Carroll and his Healthcare team worked with clients from a professional liability and general liability perspective. Concurrently, other BHSI groups worked with the same clients on offerings for business interruption, disinfection and cleaning costs.
Ever vigilant, the BHSI chief underwriting officer, David Fields, created a point of central command to monitor the situation, field client requests and execute the company’s response. The results were highly customized packages designed specifically for several clients. On some programs, net limits exceeded $100 million and covered many exposures underwritten by multiple BHSI groups.
“At the height of the outbreak, there was a lot of fear and panic in the healthcare industry. Our team responded not by pulling back but by leaning in. We demonstrated that we are risk seekers and as an organization we can deploy our substantial resources in times of crisis. The results were creative solutions and very substantial coverage options for our clients,” said Carroll.
It turns out that creativity and flexibly requires both significant financial resources and passionate professionals. That is why no other insurer can match Berkshire Hathaway Specialty Insurance.
To learn more about BHSI Healthcare, please visit www.bhspecialty.com.
Berkshire Hathaway Specialty Insurance (www.bhspecialty.com) provides commercial property, casualty, healthcare professional liability, executive and professional lines, surety, travel, programs, and homeowners insurance. It underwrites on the paper of Berkshire Hathaway’s National Indemnity group of insurance companies, which hold financial strength ratings of A++ from AM Best and AA+ from Standard & Poor’s. Based in Boston, Berkshire Hathaway Specialty Insurance has regional underwriting offices in Atlanta, Boston, Chicago, Los Angeles, New York, San Francisco, Toronto, Hong Kong, Singapore and New Zealand. For more information, contact email@example.com.
The information contained herein is for general informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product or service. Any description set forth herein does not include all policy terms, conditions and exclusions. Please refer to the actual policy for complete details of coverage and exclusions.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Berkshire Hathaway Specialty Insurance. The editorial staff of Risk & Insurance had no role in its preparation.