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By JARED SHELLY, senior editor/web editor of Risk and InsuranceŽ

Physician dispensing, gross overprescribing of opioids and changes to healthcare are seriously hurting workers' comp. That's according to Joe Paduda, a blogger and principal of Health Strategy Associates who kicked off Wednesday's general session of the National Workers' Compensation and Disability Conference & ExpoŽ in Las Vegas.

Physician dispensing gouges patients on price, he said, noting a muscle relaxer is marked up 4,470 percent. The average drug mark up during physician dispensing is three times the price of a retail pharmacy, he said.

While physicians would argue that offering drugs directly from their offices drives up adherence, Paduda debunked the argument, and made no bones about his opinion on that matter.

He noted that workers' comp usually pays for medications anyway and that going to a pharmacy to fill a prescription is hardly a chore, even for someone who's injured.

Physicians dispense drugs just for workers' comp patients. "That's $700 million," he said. "To suck that money out of the system is inappropriate," said Paduda.

Now almost 40 percent of total drug costs come from physician dispensing, he said, while that number was just 28 percent in 2008.

Paduda also highlighted the overprescription of opioids as a pain point in workers' comp because, simply, people are getting addicted.

"When people take narcotic opioids, it extends workers' comp," he said, noting that people prescribed opioids are likely to return to work later than others.

"We in the work comp world are getting a large number of people addicted to opioids and we now own those addictions," he said.

While Paduda admits there is no silver bullet to stopping the opioid problem, he said that risk managers and insurers need to acknowledge the issue, be upfront with employer patients and follow clinical treatment guidelines to solve the problem.

Davidson Pattiz, executive vice president of claims with Zenith Insurance Company, who joined Paduda on stage later in the session, suggested sending employees to in-patient detox programs could also be a viable option, albeit a tricky one.

But Paduda was careful to say that he doesn't want the pendulum to swing too much against opioid use because people certainly rely on them to help them through an injury.

Yet another obstacle for workers' comp is healthcare reform, Paduda told the audience. Physician reimbursement is set to decrease, which could make doctors change the advice they have for patients.

"If you as a surgeon aren't making the same money for surgeries, you might decide people need more surgeries, or more complex surgeries," said Paduda.

In states like California, changes to Medicare hospital reimbursement are beginning to shift the power from insurance companies to providers, he said, and it's sweeping across the country. Before, insurance companies were able to dictate prices, now the healthcare providers do so.

When it comes to removing problem doctors from an employer healthcare network, Pattiz said it's tough to compare doctors using hard data, especially since a chiropractor is different than an orthopedic surgeon. So he makes sure to utilize subjective data as well.

David North, CEO of Sedgwick CMS, however, said that data can be incredibly helpful. His organization has a five-star rating system for doctors that he endorses.

"If they're not at quantifiably what they want, you should take them out automatically," he said.

During North's segment on stage, Paduda grilled him about the transparency of the fees charged by third-party administrators, and North guaranteed that clients should expect "absolute transparency," and said clients are welcome to ask for a complete breakdown anytime.

Paduda then asked why Sedgwick has gone on such a spree of acquisitions over the past 18 months. Indeed, the company had $400 million to $500 million in revenues seven years ago, but now boasts $1.2 billion.

North said that, before, the company didn't have enough economic scale to invest in the solutions client companies were looking for. Now they can.

"We could have cut costs and reduced salaries for adjusters, or we could have changed scale," said North. "We have the ability to be much more cost competitive in the marketplace. We have better technology now? If we didn't have more revenue we couldn't have done that."

November 10, 2011

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