Risk Insider: Jason Beans

Compounding and Rampant Care in Workers’ Comp

By: | July 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]

Compound prescription growth in workers’ compensation is a striking example of how the lack of consumer involvement can cause treatment to expand from reasonable to rampant care.

Compound drugs join physician dispensing, opioid overprescribing, vocational rehab and chiro overutilization to share a common story — from initial expansion, to industry and regulator response, to some degree of containment.

In each case, the provider is not doing anything necessarily illicit or illegal, and the practices themselves do serve a purpose in some specific situations.

Combining, mixing and altering a drug can make sense for patients with an allergy to a non-essential ingredient, like dyes. Patients who have difficulty swallowing oral medications may find topical, compound alternatives helpful.

But when there is an opportunity for profit — where patients have no financial incentive and/or there is no clear regulation to control costs — some providers will abuse this gap in the marketplace. Three signs of rampant medical care are:

  • Epidemic expansion
  • Questionable positive value and very real risk factors
  • Financial incentives for clinicians, consultants and other parties

California saw compound drugs, medical foods and co-packs grow in share of total medication expenses from 2.3 percent in January 2006, to 12 percent in early 2009. Pricing controls were weak then and remain so.

Seven years after that surge, independent research on efficacy is scarce. Laboratories and consultants are known to share in the profits with the prescribing physicians.

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We have seen the federal Food and Drug Administration (FDA) get involved in improving the hygiene of compounding labs, after 64 meningitis deaths were caused by contamination at a Massachusetts compounding pharmacy. But the FDA does not verify the safety or effectiveness of compounded drugs.

State oversight, not federal, will almost certainly drive the containment effort. The Texas drug formulary caused a 65 percent reduction in problematic use of “N” drugs for pain relief.

When there is an opportunity for profit — where patients have no financial incentive and/or there is no clear regulation to control costs — some providers will abuse this gap in the marketplace.

Researchers recently reported the not surprising, but depressing, finding that Texas physicians did not shift their patients to other drugs or non-pharmaceutical care. This implies that the risky prescriptions weren’t completely necessary in the first place.

Compound containment inroads can also be made at the ground-level practices of claims payer operations and managed care organizations. I have seen some medical management programs virtually eliminate opioid problems and similar progress is possible.

The extent to which pharmacy utilization best practices are currently being used to address compounding is unknown; however, we should have some data soon. The “Workers’ Compensation Benchmarking Study” just recently surveyed claims executives to understand the headway organizations are making to curb this issue as well as other rampant medicine issues.

Looking forward, I expect the industry will have a much better handle on compounding in the next three to five years, like its over-utilized predecessors.

Effectively applying past “lessons learned” will be key to reducing compound drugs’ share of the pharmacy market back to levels consistent with the very small percentage of prescriptions that actually require customization.

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Opioid Strategies

Bluegrass State Leads the Opioid Fight

Kentucky, long embroiled in the opioid epidemic, is turning its challenges into strategies that can help other states drive change.
By: | July 5, 2016 • 6 min read
Welcome to Kentucky state road sign

Central Appalachia earned a distinction as the epicenter of the nation’s opioid-addiction epidemic for a number of reasons.

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Two key factors are the complex injuries suffered by coal miners and the physical demands placed on workers toiling in other hazardous industries in that region such as logging and trucking.

Others include the region’s economic misfortunes, lax prescribing practices, access to pill mills, and pharmaceutical company marketing.  All led to an ongoing drug-abuse scourge that surfaced there in the 1990s, studies and observers report.

“Central Appalachia, which for us is eastern Kentucky, was one of the first areas to see the opioid epidemic explode in the 1990s,” said former Bluegrass State attorney general Jack Conway.

Jack Conway, former attorney general, Kentucky

Jack Conway, former attorney general, Kentucky

“Because in Appalachia you had mining, you had a lot of heavy industry, trucking, and more workplace injuries on average than you would in other parts of the state. You saw an increase in the prescribing and utilization of opioids and it created an addiction epidemic.”

Now, as the rest of the nation experiences opioid abuse patterns seen early on across Central Appalachia, Kentucky provides examples for battling back against the epidemic.

In 2012, Kentucky became the first state among jurisdictions adopting stricter prescription-drug monitoring programs (PDMPs) with objective criteria mandating when prescribers must register and review a state database of patient prescription histories, Brandeis University’s PDMP Center of Excellence reports.

State PDMPs seek to change provider prescribing practices and prevent patients from doctor-shopping to obtain multiple prescriptions.

Kentucky’s latest PDMP was born from a 2012 comprehensive law adopted to combat opioid abuse.

“Kentucky has a great [PDMP] system,” said Tom Clark, research associate for the Brandeis Center of Excellence. “It is very well supported by the state. Of course, this is all a response to Kentucky being in the epicenter of the prescription drug abuse epidemic and it has been for a long time.”

While all states except Missouri have PDMP laws, participation in many states remains voluntary, said Brian Allen, VP of government affairs for Optum workers’ comp and auto no-fault. In the last three years or so, however, more jurisdictions are making their use mandatory.

“There has been a lot more renewed emphasis on [PDMPs] because everybody has been trying to get their heads around this opioid problem,” he said.

A May 2016 Center of Excellence report with data from Kentucky and the other states indicates that increased PDMP use immediately impacts controlled substance prescribing and doctor-shopping.

Reports linking Central Appalachia’s work injuries to drug abuse have persisted for years.

Yet only a few states have laws as strict as Kentucky’s, requiring all prescribers to register and check their PDMPs when initially prescribing opioids and benzodiazepines, and again every three months when continuing the prescriptions, the PDMP Center of Excellence reports.

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Meanwhile, reports linking Central Appalachia’s work injuries to drug abuse have persisted for years.

A 2002 combined U.S. Justice Department and Kentucky State Police assessment described a growing threat from prescription painkillers. The threat was so specific to Appalachia that opioids and opiates became known disrespectfully as “hillbilly heroin.”

“In the eastern coal mining counties of Kentucky, the large-scale diversion and abuse of painkillers are particular problems,” the report warned.

“In the past, coal miners spent hours each day crouched in narrow mine shafts. Painkillers were dispensed by coal mine camp doctors in an attempt to keep the miners working.

“Self-medicating became a way of life for miners, and this practice often led to abuse and addiction among individuals who would have been disinclined to abuse traditional illicit drugs.”

Michelle Landers, VP and general counsel, Kentucky Employers Mutual Insurance

Michelle Landers, VP and general counsel, Kentucky Employers Mutual Insurance

Michelle Landers, VP and general counsel for Kentucky Employers Mutual Insurance, agreed that eastern Kentucky’s historical dependence on coal mines, and related service industries like trucking, helped link workplace injuries and chronic pain with opioid use.

KEMI, which issues policies to coal mines, is the Bluegrass State’s largest workers’ comp insurer.

Coal operations provide one of eastern Kentucky’s few employment opportunities. Mining also produces severe workplace injuries, caused by accidents such as accidents such as cave-ins or heavy machinery malfunctions, Landers said.

“It’s not an industry where you are going to have small injuries,” she elaborated.

“They are typically severe or the chronic type of injuries you expect from people being underground.”

Kentucky’s private-industry workers, in general, experience a high injury rate. U.S. Department of Labor statistics for 2014 ranked Kentucky among 19 states with a recordable injury rate significantly higher than the national average.

Centers for Disease Control and Prevention data for the same year, meanwhile, shows Kentucky among five states with the nation’s highest rate of overdose deaths.

Early Adopter

KEMI first discovered a frequent use of the narcotic OxyContin to treat work injuries after contracting with a pharmacy benefit manager in 2001, Landers said. The PBM data revealed questionable practices, such as doctors prescribing high doses of the drugs early in the course of treatment for back strains.

“We were seeing things out there about the high levels of addiction and [overdose] deaths and we didn’t want to contribute to that,” Landers said.

A 2015 study prepared by the Institute of Pharmaceutical Outcomes and Policy at the University of Kentucky reported that since the law’s passage,prescriptions for controlled drugs decreased 4 percent to 8 percent during the same period.

So KEMI became an early adopter of measures like educating adjusters and nurse case managers about the dangers of opioids and teaching them to recognize red flags, such as doctors prescribing the drugs for longer periods than typically appropriate.

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KEMI also used PBM data to identify frequently prescribing doctors.

“If you were treating with one of those [doctors] that might be a red flag,” Landers said.

KEMI’s concerted efforts included using its attorneys to engage in medical-fee disputes challenging claims before administrative judges when inappropriate prescribing occurred.

“We have, from early on, taken the approach that if we don’t feel it’s appropriate and we don’t get cooperation from the physician, we are going to challenge it,” Landers said.

Landers will speak at the 25th Annual National Workers’ Compensation and Disability Conference® & Expo on Dec. 1, during a presentation titled “Lessons Learned From Fighting Drug Abuse in the Opioid-Crisis Epicenter.”

The 2012 Kentucky law has limited prescription abuse. In addition to requiring prescribers to report to the state PDMP, it also regulated pain clinics.

A 2015 study prepared by the Institute of Pharmaceutical Outcomes and Policy at the University of Kentucky reported that since the law’s passage, prescribers registering with the PDMP increased by 262 percent, while annual prescriber queries into the PDMP rose 650 percent.

Prescriptions for controlled drugs decreased 4 percent to 8 percent during the same period.

 Cindy Whitehouse, CEO and founder, Ascential Care

Cindy Whitehouse, CEO and founder, Ascential Care

Appalachia still has issues, but the situation is improving.

Yet there remain pockets of physicians in Appalachia who still overprescribe opioids, said Cindy Whitehouse, CEO and founder of Ascential Care, a Lexington, Ky.-based managed care company.

But she agrees the law has helped, and other states could benefit from similarly stringent measures.

“I think we have more tools in the states that have been battling this [opioid epidemic] for some time,” Whitehouse said. “That has made us stronger in the ability to control it.”

Roberto Ceniceros is senior editor at Risk & Insurance® and chair of the National Workers' Compensation and Disability Conference® & Expo. He can be reached at [email protected] Read more of his columns and features.
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Sponsored: Liberty Mutual Insurance

Buyers Beware: General Liability Outlook May be Shifting

Buyers should focus on building a robust GI program and risk management infrastructure to lessen the impact of emerging GI trends.
By: | July 5, 2016 • 6 min read

The soothing drumbeat of “excess capital” and “soft market” to describe the general liability (GL) market is a familiar sound for brokers and buyers. Emerging GL trends, however, suggest the calm may not last.

Increasing severity of GL claims may hit some sectors like a light rain at first, if they have not already, but they could quickly feel like a pelting thunderstorm in others. A number of factors could contribute to the potential jump in GL prices for certain industry segments or exposures, possibly creating “micro” or niche hard markets in the short-term, and maybe even turning the broader market over the longer-term.

“There are trends we’re seeing that will play out slowly. Industries that carry more general liability exposure will and have been hit first and hardest, but it won’t apply across the board initially,” said David Perez, Senior Vice President and Chief Underwriting Officer, for Liberty Mutual Insurance’s National Insurance Specialty operation. “There is ample capital in the market today, which allows a poor performing account to move its policy frequently from carrier to carrier. Poorer performing classes, however, will likely face increased pricing for GL policies and a reduction in capacity.”

The good news for buyers is that they can take action today to lessen the impact these trends and the evolving market may have on their GL programs.

David Perez on the state of the GL market.

Medical and Litigation Trends Drive Severity

One factor increasing claim severity is the rising cost of health care, driven both by greater demand and by medical inflation that is growing faster than the Consumer Price index.

The impact of rising medical costs on commercial auto is well-known. Businesses with heavy transportation exposures are finding it more difficult to obtain coverage, or are paying more for it.

That same trend will impact general liability, just on a slower and more fragmented basis.

LM_SponsoredContent“In light of these trends, brokers and buyers should seek to understand how effectively their current or potential insurers defend GL claims, particular in using evidence-based medicine to assess and value the medical portion of a claim, and how they can provide necessary care to claimants while still helping clients control their total cost of risk.”

— David Perez, Senior Vice President & Chief Underwriting Officer, National Insurance Specialty, Liberty Mutual Insurance

“It takes longer for medical inflation to register through the tort system in general liability than it does in auto liability (AL) because auto claims are generally resolved more quickly,” Perez said. “But the same factors affecting severity in AL also exist in GL and as a result, it’s foreseeable that we will not only see similar severity trends in GL, but they may in fact be worse than we’ve seen in commercial auto.”

Industries with greater exposure to severity in general liability claims should be the first wave of companies to notice the impact of medical inflation.

“Medical inflation will drive up costs across the board, but sectors like construction and product manufacturing have a higher relative exposure for personal injury lawsuits.”

The impact of medical inflation on the GL market.

Beyond medical inflation, two litigation trends are increasing GL damages. First, plaintiffs’ lawyers are seeking to migrate the use of life care plans—traditionally employed only for truly catastrophic injuries—to more routine claims.  Perez recalled one claimant with a broken thumb and torn ligaments who sought as much as $1 million in care for the injury for the rest of his life.

Second, the number of allegations of traumatic brain injuries (TBI) in GL claims is growing.  It can be difficult to predict TBI outcomes initially and poor outcomes can be expensive and long tailed.

“In light of these trends, brokers and buyers should seek to understand how effectively their current or potential insurers defend GL claims, particular in using evidence-based medicine to assess and value the medical portion of a claim, and how they can provide necessary care to claimants while still helping clients control their total cost of risk,” notes Perez.

Changing Legal Landscape

Medical inflation and litigation trends are not the only issues impacting general liability.

Unanticipated changes in court interpretations of policy language can throw unexpected pressure on GL pricing and capacity.

Courts sometimes issue rulings interpreting policy language in a manner that expands coverage well beyond the underwriter’s original intent. Such opinions may sometimes have a retroactive effect, resulting in an immediate impact on not only open, but also closed cases in some circumstances.

Shifts in the Marketplace

In addition to facing price increases, GL brokers and buyers will be challenged by slightly shrinking capacity due to consolidation and repositioning among carriers in the marketplace. “Some major carriers have scaled back their GL writing, resulting in a migration of experienced senior management. As these executives leave, they take their GL expertise and relationships with them, resulting in fewer market leaders and less innovation,” Perez said.

“Additionally, there are new carriers coming into the business that may not have the historical GL loss data to proactively identify trends or the financial strength and experience to effectively service their GL customers and brokers. Both trends make it important for brokers and buyers to work with an insurer that is committed to the GL market and has the understanding and resources to help better manage risks impacting customers.”

Last year saw a high level of mergers and acquisitions in the insurance industry. Buyers should take advantage of that disruption to re-evaluate their needs and whether their insurers are meeting them.  Or better yet, anticipating them.

What’s a Buyer to Do?

Buyers—and their brokers— should look to partner with insurers that can spot emerging trends and offer creative solutions to address them proactively.

What should buyers and brokers do, given the trends facing the GL market?

“Brokers and buyers should value insurers that have not only durability and a long history in the general liability business, but also a strong risk management infrastructure,” Perez said. “Your insurer should be able to help you mitigate your specific risks, and complement that with coverage that works for you.”

Beyond robust GL claims and legal management, Liberty Mutual also provides access to one of the insurance industry’s largest risk control departments to help improve safety and mitigate both claim frequency and severity.

In addition, notes Perez, “Even if a company has a less than optimal loss history in general liability, there can be options to provide adequate coverage for that company. The key is to partner with an insurer that has the best-in-class expertise, creativity, and flexibility to make it happen.”

By working closely with their insurers to understand trends and their potential impacts, brokers and buyers can better prepare for the possible GL storm on the horizon.

To learn more about Liberty Mutual’s general liability offering, visit https://business.libertymutualgroup.com/business-insurance/coverages/general-liability-insurance-policy.

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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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