As we get rolling in 2015, enterprises continue to approach a technology tipping point. According to our Digital IQ survey, 35% to 50% of technology spending is outside of the CIO’s budget. This data raises the question: Is it possible for CIOs to continue to influence how the enterprise is leveraging technology? The short answer is yes, but CIOs need to transform their approach to leadership. The New Year calls for a new CIO. The top-down days of technology leadership are over. Budgets, standards, procurement and governance…these concepts of control have been central to the CIO’s playbook, but they are increasingly ineffective as CIOs lose the ability to dictate how technology dollars are spent. Rather than instituting rules, CIOs must inspire executives across the enterprise to follow their lead. The measure of a successful CIO is shifting from how well the IT department functions to whether the entire enterprise has the ability to both drive and deflect digital disruption. If CIOs are the Pied Piper, the music is the “art of the possible.” Through a bold vision combined with deep listening, CIOs must guide the organization in maximizing technology’s full potential. The old C-I-O stood for Control, Infrastructure and Organization. The new C-I-O stands for Catalyst, Integration and Outside-in. Let me explain. From Control to Catalyst or Consultant or Communicator The CIO has no choice but to shift from one who controls technology spending to a catalyst who sparks action. The best way to persuade the enterprise to push the boundaries of technology is to build relationships and introduce big ideas through demos, prototypes and market intelligence. CIOs need to use demos to show the enterprise how business goals can be accomplished through the hands-on exploration of emerging technology. From Infrastructure to Integration Shadow IT has led to siloed systems such as SaaS and cloud applications that have to be integrated so businesses can get the most value out of them. Gluing together best-of-breed solutions isn’t new for CIOs. Integration was a critical skill set as we used middleware to stitch together customer relationship management (CRM) and enterprise resource planning (ERP) systems with legacy platforms. But integrating legacy systems with digital is different, given new vendors, technologies and sourcing models. CIOs need to take a hard look at their team’s integration skills and partnerships to make sure they are up to speed. From Organization to Outside-in In the past, we haven’t looked very far for inspiration to innovate. Most corporations have a history of learning about new technologies by tapping a few trusted vendors, attending a conference or two and reading a handful of trade publications. For the most part, organizations have turned their gazes inward toward their own organizations for innovation ideas. In the age of digital, where new technologies are plentiful, CIOs need to lead the charge of outside-in innovation, looking outside to communities such as makers, universities, open source, contests, crowd funding sites and global innovation hubs for inspiration. The role of the CIO is undergoing a seismic shift, and it’s creating a great deal of uncertainty and angst. Change is difficult, but it’s also exciting as it leads us to discover strengths and interests that we didn’t even know we had. It’s incredible what we can achieve when the future is on the line, as it is now. For CIOs to come out on the other side of this haze, they need to make themselves “tomorrow ready” by reshaping their roles today.

Of all the states, who would have guessed that New Mexico would be the hotbed of medical marijuana court decisions?  Between the Vialpando v. Ben’s Automotive in May and the Maez v. Riley Industrial case, handed down earlier this month, New Mexico’s court of appeals appears to be one of the most pro-marijuana courts in the nation. Back in May, when I first wrote about this issue, I wondered why the reasonableness of the marijuana treatment was not questioned, and our corporate counsel told me that surely there be additional case law. Sure enough, the court in Maez decided to take on the issue. Maez suffered from an industrial accident and was treated by Dr. Reeve.  Dr. Reeve prescribed a variety of medications, including several opioids. As required for patients on long-term opioid therapy, he performed regular urine drug tests. Maez tested positive for marijuana. Typically, recreational marijuana use, or the use of any illicit substance, raises red flags with the prescriber. But not with Dr. Reeve! Dr. Reeve informed Maez that, if he was going to use marijuana, he needed to have a medical marijuana license. Luckily for Maez, Dr. Reeve was happy to provide him with one. According to Dr. Reeve, “Patients are going to use cannabis either one way or the other. . . . If a patient requests that I sign [a license], I will sign it . . . but I’m not recommending . . . or in any way advocating for the use of medical cannabis.” Dr. Reeve also considers the use of medical marijuana to be the patient’s decision, “as it’s private and voluntary, and it’s not overseen by a physician.” So the guy ended up on a medical marijuana regimen because of a failed drug test. That should be sufficient for the court to find in favor of the payer, right? Nope.  And it gets worse. The court went on to rationalize Dr. Reeve’s actions as reasonable, stating that “[Dr. Reeve] adopted a treatment plan based on medical marijuana. He would not have done so if it were an unreasonable treatment.” Imagine if that logic was applied to all workers' comp medical treatment. The doc says it’s reasonable. . . so it is. State statutes and regulations have been evolving for more than a decade to specifically counter this argument. But not in New Mexico. And it gets even worse. To take this determination one step further, because the physician said it is Maez's choice whether to use medical marijuana, the court, by default, has determined that the self-directed use of marijuana by this injured worker is reasonable because the physician signed off on it. This is patient-directed care at its absolute worst. To recap what led to this decision: illicit drug use, perpetrated by the injured worker, condoned by the doctor and supported by a court of law. I wish I could tell you that marijuana should be the least of your concerns, but if this is the specious logic to which we’re beholden. . . we’ll need better guidelines, better tools and better lawyers.

Timely response and clear communication are critical for handling workers' compensation claims. However, when it comes to gathering information, “timing” might be just as important as “timely.” A story out of Ft. Worth, TX highlights that the process needs to be a well-choreographed dance, or significant problems can arise. Fort Worth Mayor Betsy Price publicly admonished CorVel Enterprise Comp for asking "inflammatory questions" of a police officer the morning after he was shot and seriously wounded in the line of duty. The officer, a 19-year veteran of the Fort Worth Police Department, was shot in the abdomen while he and another officer responded to a mother’s 911 call asking for help with her son. The son, who was barricaded in a bedroom, opened the door and shot the officer. Both officers returned fire, killing him. The officer underwent surgery at Texas Health Harris Methodist Hospital. Mayor Price, in a letter to CorVel, said the company’s workers’ compensation representative showed up at the hospital the morning after the shooting and proceeded to ask questions of the family, officers and hospital staff. The letter calls the questions “inflammatory” and criticizes the timing “as one of our police officers rests in a hospital bed recovering from gunshot wounds received last night.” The mayor is requesting CorVel CEO Gordon Clemons and his staff meet with her to “determine the facts and get to the bottom of this matter.” The company did not respond for the initial newspaper article and, as of this writing, still does not appear to have responded publicly. I must state unequivocally that we do not know what questions were asked, or in what tone they were delivered. Clearly, however, people were upset by what they perceived to be an entirely inappropriate line of questioning, and people’s perceptions will be their reality. The questions might have been of a simple, by-the-book initial claims investigation nature. Given the emotionally charged atmosphere, however, I would suggest the timing was likely poor. Perhaps the best question that could be asked in that highly volatile 24-hour period should have been, “How can we help?” [Editor's Note: It now appears that this question was, in fact, the point of the visit, but communication was poor. Here is a link to a followup column by the author. ] This highlights such a critical issue for our industry. If there are two things workers’ comp is routinely criticized for, it is lack of timeliness and of communication. After all, we are the industry that invented the concept of “hurry up and wait.” Under normal circumstances, having a workers’ comp representative present and involved within 24 hours would be a great thing – assuming, of course, that the representative did not make it a confrontational affair. Yet, somehow, an employee in this case has produced the opposite effect, angering an injured worker's family, his associates and employer – the client responsible for paying the bills. Perceptions can have lasting and damaging effects. Unfortunately for the workers’ compensation industry, perception is not something we spend a great deal of time worrying about. We are a statutorily driven industry, going through the regulated processes day after day after day. It is sometimes easy to forget that there is a human being attached on the other side of that claim, and that our actions are continually creating perceptions about us and our trade. That lack of awareness on our part can lead to costly errors, and that may be exactly what has occurred in this case. We do not have the full details; this is a one-sided story to date. What we do know is that something riled the mayor enough to write that letter and take the entire matter public. In one way, her actions accent a positive point of the story, as they show an employer actively engaged in the welfare of an employee, as well as the management of his recovery. It is something we need to see far more of across the nation. As for the CorVel employee involved, we do not know if the person was a competent employee just trying to perform the processes required of the job -- or is living proof that a company is only as good as the biggest idiot on its payroll. It really doesn’t matter, as the perceptions of the one side are the only ones that are of concern at a public level. Those perceptions tell us that proper timing may be more important than proper timeliness, and that showing compassion is essential. Sometimes, we can show compassion just through proper timing.

I grew up watching Knight Rider and seeing KITT, where Michael would continuously talk into his watch, and KITT would drive to his rescue (through a garage door or two) or safely transport him through the night while Michael had a catch-up on his sleep -- only to be woken up by the local police freaked out at the thought of him asleep at the wheel, only to be foiled by his pretending to have a "crook neck"! Move forward 15-plus years, and we now talk to our watches, and cars are driving themselves. This futuristic TV show and its "connected car" is today's reality and only becoming more and more real. We are allowed driverless cars from January 2015. The connected car is a super exciting area that many folks already talk about in great detail. In fact, Capgemini's Car's Online study  presents a compelling case. Here is a quick summary from me of benefits:

• Safety -- by default, car capability increases beyond recognition. Humans no longer control of the car (especially as the car will react quicker than we ever would). In 2015, all cars in Europe must be equipped with eCall, a system that automatically contacts emergency services and directs them to the vehicle location in the event of a serious crash.
• Fleet knowledge and efficiency -- knowing when to roll vans/cars/trucks across what roads.
• Intelligent GPS -- bye bye theft, traffic jams and other inconveniences.
• Location-based services -- working out the best things for you along the way, including charging points for you and your car!
• Infotainment and more -- never be out of touch; everything is connected to your biometric-enabled smart phone. Your fingerprint not only unlocks the phone but tells the car who is driving and sets your profile and other preferences.

Of course, there is far more to it than this. The key here for me -- it's an unprecedented volume of data for us to derive insights from. There is a good summary from Direct Line in the UK here. A 12-month pilot, for example, gathered more than 11 million miles of data. It's nothing new! One of my frustrations is that everyone talks about telematics as a new shiny thing. Like GPS, telematics has been around for more years than I care to recall -- however, it has only just found its feet in mainstream marketing and the minds of consumers, primarily because of plummeting technology costs for the telematics "black box," smartphones that can do the same (or similar) things and, most importantly, a problem to solve: the increasingly high cost of insurance. I use the word "mainstream" carefully; telematics is talked about a lot, with adoption in some key demographics (young drivers). While it has applicability across a great many other demographics, the number of actual policies is still relatively low compared with the total number of policies in force for any one insurer. I do, however, believe this will change, not because of the desire to reduce the cost but more because of the way we move to buy everything as a true utility or service. This was debated at a recent roundtable discussion by Post magazine, which I participated in. However, to drive significant adoption, it may need a more fundamental change. Perhaps a change in law from opt-in to opt-out? It would certainly give governments the opportunity to truly consider road charging properly! Let's be blunt! The connected car brings so much more and is yet another blunt instrument providing oodles of data back to organizations that allow you to use it. As in most of these cases, there is always a pioneer, and in the world of motoring it's usually Formula 1, followed quickly by Mercedes in the consumer markets, before it filters down to other manufacturers. As an aside, there are some great videos here on data in F1 here and here - the difference being, soon this will be available to all of us, on our phones. F1 is a world where hundreds or thousands of changes are made to the car during a race to increase performance and the team's chances of winning. It's all data-driven. Imagine now if that same logic could apply to your everyday commute. Extend the life of your car, avoid accidents and congested roads and get cheaper gasoline. The list goes on -- these, in fairness, are all here today and almost all through your smartphone. It's simply quicker and easier to update than the cars' in-built systems. Just look at the long list of features on the Ford Fiesta driving experience page. Today's reasonably priced car is a hive of sensors, features and functions. Advertising of them has moved from mpg, performance and power steering, to how it connects to the rest of your digital life, from Foursquare check-ins with Mini, to connecting to your phone in every car. (A change in law helped that specifically here in the UK, to ban the use of phones while driving.) In fact, infotainment is now seen as more important in most cases than the actual driving experience itself. From an insurance perspective, the connected car offers a great insight into not just where and when you drive, but how you drive, too -- therefore what risk you present to insure. We already have the ability to do some great things way beyond UBI (usage-based insurance); organizations like MyDrive compare your driving style to that of advanced motorists -- the key here being you can drive fast (among others) safely. In fact, go a step further: Allianz has found in the Australian market that if you are a meat eater you are a better driver than your vegetarian counterpart. Data is starting to tell us much more than ever before. What does the future hold? Jump forward five, 10, 15 years. We will live in world of autonomous vehicles. Car safety will have excelled beyond recognition. Motor accidents will be a thing of the past. It is a familiar story now. What or who do we insure then? The personal market with have dissolved. The fleet and commercial market will have evolved. From a personal perspective, I still question even the basics of car ownership. Going back to where I started this post, I remember growing up as a kid, and my first ambition at 17 was to get driving lessons, pass my test and buy a car. Ask a 17-year-old today in the UK where car ownership is on his list of priorities, and I would be surprised to see it in the top 10. This in itself brings a new challenge. We will no longer insure the driver and vehicle; you will simply rent your journey with a Zip Car or similar, which will include a near-new car, Sat Nav, insurance, gasoline and much more. These new schemes, or fractional ownership, could destroy the need (in urban areas, at least) or the desire to own a car and its associated financial burden. For insurance companies, we need to decide on what or where the market will be - who we establish new partnerships with outside the vehicles - to drive new revenue streams and make the most of the vast volumes of data available about each and every journey. Of course, with this brings more questions, the most important being: If all this data is so valuable, who owns it? Home, James! Personally, while I love driving, 99 times out of 100, we could probably be doing something else far more valuable when the one thing we haven't solved yet is creating more time. I wait for my autonomous car to chauffeur me around in the future!

Here is a wellness needs analysis to help you choose the best approach for your company. It is based on wording, definitions, regulations and related government proposals from the Employee Benefits Security Administration, Department of Health and Human Services and other ACA-related government writings easily found via Google. This serves to set a high-level framework -- certainly not “legal advice,” yet respecting that, when it comes to government, today’s suggestions are tomorrow’s compliance issues. More importantly, this perspective takes out the profit-driven vendor’s depiction of what might be best for your company. The essence is pleasantly simple. Wellness is defined by government in two forms: 1) Participatory Wellness: Provides health-related opportunities equally to all workers, such as reimbursed gym membership, classes on weight loss, smoking cessation and other health/lifestyle issues. Participants can be offered low-level rewards like gift cards. 2) Health-Contingent Wellness: Programs that seek to identify individual health factors and set individual requirements for risk conditions. The incentive/penalty aspects can be as much as 30% of the premium costs for the individual. Basically, smokers and employees with high cholesterol or body mass indices pay more unless they follow a “reasonable” regime with “reasonable” results to address these problems -- "reasonable,” as a government term, being clear like mud. I would wager most readers gravitate toward participatory programs, correctly assuming that they are less expensive, less intrusive and, frankly, more respectful of employees' desires. Participatory programs generate goodwill, in the spirit of wellness, and help individuals who are determined to help themselves. Optimally applied, they offer a gentle positive push via passive awareness efforts, essentially “farming” for participants as opposed to actively “hunting” for candidates via the health screenings required in health-contingent programs. Participatory programs seem like a no-brainer and therefore raise the question: Is there any logical place for health-contingent programs? After all, they cost a ton (averaging more than $600 per employee annually) and have not been shown to improve health or return dollar savings. In some sense, they are totally illogical in presuming that today’s employees are tomorrow’s health risk for the employer. Consider that when any employee leaves, the employer has wasted the health-contingent wellness dollars spent on him. Further, few employers today offer retirement health plans and therefore do not “own” the highest-risk period of most employees' lives. Let me simplify further. When selling a house, you cancel and pro-rate your homeowners insurance on the day of closing. I submit that health-contingent wellness is as silly as allowing the next homeowner to use the remainder of the policy you already bought. So, back to the question: Is there a logical place for health-contingent programs? Surprise! Absolutely! And the impact would be strong and immediate. Health-contingent wellness makes sense in workplace environments with “presumptive benefit” requirements for workers' compensation. Police, firemen and first responders in most jurisdictions are granted “presumptive” WC benefits for heart, hypertension, lung and related issues arguably connected to the stress of the job. Movements are in play to widen these benefits to include mental health disorders and cancers and to include other classes of public employees. Most public workforces have low turnover and retirement health plans. Therefore, investing in tomorrow’s health today is a justifiable hedge against long-term risk. Also, and more importantly, presumptive benefits involve issues that can be mitigated by condition-specific wellness programs. Controlling cholesterol, high blood pressure, weight, anxiety, smoking, alcohol, etc. is effective and constitutes money well spent. Health-contingent wellness would identify those with health risks and set them on a personal improvement plan with expected milestones. Targeted employees would have as much as 30% of premium contribution at risk for noncompliance. The workforce, as well as the public, would be better served. Editorial comment: I realize that engaging some public unions in health-contingent wellness presents a difficult collective bargaining issue. However, I submit that these employees must consider public interest. They should not be able to have it both ways. One can’t argue that the nature of the job is clinically connected to health conditions yet avoid known methods to mitigate those health risks. One can’t enjoy a luxury of expanded WC benefits without personal responsibility for health. Besides, the ACA says it should be so! Quick Tip – Consider the Spectrum in Choosing Your Wellness Approach For many employers, participatory wellness makes more sense. But don’t assume too quickly before making a critical assessment of your workforce. Start from the extreme example of public employees with presumptive WC benefits and work backward to find your risk level. Questions to ask include: Do you have low turnover? Do you have an aging workforce? Do you have retirement health obligations? Are there specific issues that you can identify affecting today’s workers’ comp costs such as obesity, diabetes or other co-morbidities? What are today’s health costs telling you about your workforce? Can you make a near-term, dollar-savings case for addressing individual employees head-on in a health-contingent wellness program? If you answered any with “yes,” then you may choose the route of health-contingent wellness. Approach this with precision. Manage health issues with proven programs and specific improvement expectations. My personal suggestion for vendor contracting is to install some mid-program “escape clause” if interim expectations and milestones are not met. Common sense can prevail when it comes to wellness. Good luck!

Washington county and Wisconsin are right in the middle of a seismic shift in the delivery of healthcare in America – from primary care as a loss leader for the big hospital corporations to medical homes for employees right at the work site. The latest company to install an on-site clinic is West Bend Mutual Insurance, the largest employer in the county. West Bend has reportedly contracted with QuadMed, a subsidiary of QuadGraphics, another major employer in the state and county. This clinic will be the “silver lining” for West Bend’s 1,100 employes, who have always enjoyed great benefits and work environment. “Silver lining” is the tag line for West Bend’s advertising and refers to the protection offered to policyholders. But it also fits what the new benefit will do for its workforce. They will enjoy convenient, relationship-based, long-term-oriented, proactive and cost-effective primary care on campus. Those adjectives do not generally apply to the in-and-out, symptom care in big system medicine. West Bend and its people can expect to see significant improvements in their workforce health metrics, like the percentage of smokers, cholesterol levels, blood pressure and even body mass index. They can also expect to see health costs drop 20% to 30% over time. That’s been the audited experience of QuadGraphics, which pioneered on-site health care starting in 1990. Its QuadMed now provides contracted medical homes for 120 major employers in 90 clinics across the country serving 150,000 members. That includes NML, Briggs & Stratton, Kohler, Rockwell and MillerCoors. Quad is one of several dozen entrepreneurial providers that have jumped into the business of on-site or near-site clinics. Quad started with its own employees and fulltime doctors, but now offers a menu of other options, such as clinics headed by a nurse practitioner (NP). Serigraph contracts for its on-site clinic with Interra Health, a Brookfield-based provider. We also contract with Paladina Health, which has roots in Wisconsin, for part-time primary care doctors. Five other manufacturers in the county also use Paladina’s “concierge” doctors for their people. HealthStats, Charlotte N.C., installed a clinic headed by a physicians’ assistant (PA) for the West Bend School District in 2013. Savings are already apparent. Office visits, for example, typically run $22 to $40 at on-site clinics vs. $160 to $190 at the big systems. Lab tests cost about half of what big systems charge. HealthStats also won a trifecta with a contract for a clinic for the county, city and school district in Waukesha. It also services city of Kenosha employees. Other local governments and school districts are jumping on the bandwagon. You get the picture. The nature of primary care in America is changing rapidly toward a model that keeps people well and out of the expensive, dangerous hospitals. The big healthcare corporations have realized the challenge, and some, like Froedtert and Pro Health, are overhauling their business models to offer clinics tailored for employers and their employees. They are late to the game, but appear to be responding to the competition. A few hospital-based systems, like Bellin Health of Green Bay and Theda Care of Appleton, saw the train coming early and moved fast into direct contracting with private companies. Their clinics center on patients as customers, as opposed to the specialist -centered model of the big systems that drove U.S. healthcare into unsustainable hyperinflation. Here’s a major piece of irony: The Affordable Care Act, aka Obamacare, was supposed to address the cost issues but has worked to drive up premiums. It is employers and their entrepreneurial vendors for medical homes that are bending the curve for American health costs. Disruptive innovation – if ever an industry needed disruption, it’s U.S. healthcare – is just getting started. Some big players are joining the revolution. DaVita, the nationwide dialysis chain, bought the predecessor to Paladina. Humana bought the Concentra clinic chain. Walgreens runs clinics. Not all are holistic medical homes, but they are headed in that direction. Just recently, QuadMed and Walmart cut a deal to run a pilot that moves Walmart’s rudimentary clinics into a fuller range of services, headed by a PA or NP. Office visits are $40. If the pilot works, and Walmart puts its full muscle behind this new delivery model for primary care, look out. The concept behind medical homes is sound. They allow employers to attack both sides of the healthcare equation – health and health costs. The contracted medical teams can home in on every employee with a chronic disease condition, the source of most costs. They are passionate about getting the disease conditions under control. Better and better predictive analytic tools help to identify those high-risk employes. On the economic side, if expensive specialist care is needed, the teams can direct patients to the highest-value providers for both quality and price. With price variations routinely of more than 300%, there are easy pickings for savings. New transparency tools highlight the best buys. In short, the medical homes put employers back in charge of the medical supply chain. The happy ending of this blog is that Washington county and some parts of Wisconsin are leaders in the medical home movement. We are early winners in terms of big savings.

Outsourcing might just be the most common business management earnings booster of the past 10 years. Which means that it is also a top candidate for becoming a major emerging risk in the near future. The idea of outsourcing is an extension of the fundamental logic of capitalism: specialization. Processes are good candidates for outsourcing when there are other firms that can perform the same service at a significantly lower cost. Cost Advantages When you start looking at a potential outsourcing situation, you need to understand the source of the cost advantage. There are several possible drivers:

• Higher efficiency
• Lower wages paid to the people performing the outsourced work
• Lower overhead for the outsourcing partner

But there are other ways that a cost advantage might come about that are not as desirable:

• Lower safety and health standards
• Lower spending on quality control
• Lower amount of slack resources that can be available when a machine breaks or a key person gets sick
• Lower-quality source materials

How to Control Risks of Outsourcing If an outsourced process is not only out of sight but also out of mind, this emerging risk may become a current problem. There are two basic ways of controlling the risks of outsourcing: by specifying standards at the outset of the arrangement and by inspection of the process and output on a continuing basis. But with the explosion of outsourcing over the past 10 years, even firms that had set down extensive and clear standards at the time of the original agreement and that have allocated the needed resources for inspection of the processes and outputs are at risk from the complacency that comes from the the passage of time without serious incident, the changing individuals on both sides of the agreement and the changing pressures on both organizations. An outsourced process is out of sight. If it also becomes out of mind, then it will likely move out of the emerging risk category into the current problem category. This article first appeared on WillisWire.

A January 2015 Workers’ Compensation Research Institute (WCRI) study that focused on three new medication strengths has again questioned the practice of physicians dispensing medications.  Some analysts argue that the new strengths are designed to skirt price controls and generate exorbitant profits for doctors and drug manufacturers and repackagers. But another explanation is possible: that doctors and drug companies have identified new strengths that patients want. In any case, competition will, over time, drive down prices on the new medications just as it did on ones that have been in the market for a long time. The study titled, “"Are Physician Dispensing Reforms Sustainable?” prompted Michael Gavin, president of PRIUM, a subsidiary of Ameritox, to write an article titled "Physician Dispensing: I've Changed My Mind" on this website. He said: (1) ”that drug repackagers in California created novel dosages of certain medication to evade the constraints of the physician dispensing regulations”; (2) “allowing repackagers to create new NDC codes and charging exorbitant amounts of money for drugs that would have been substantially cheaper had they been secured through a retail pharmacy”; and (3) "Worse, utilization of these medications skyrocketed as a result of the revenue incentives for physicians (my conclusion, not WCRI’s)”. This article analyzes the Cyclobenzaprine HCL medication, with emphasis on the new generic 7.5mg strength that was reviewed in the WCRI study and cited in the article, “Loophole for Doctors on Drug Dispensing,” that Ramona Tanabe from WCRI wrote for this website. The 7.5mg Cyclobenzaprine HCL was first made available as a generic by the pharmaceutical company “KLE 2 Pharmaceuticals” ((www.kle2.com). The company's mission statement reads: “It is our goal to provide new therapies via unique strengths, delivery methods and/or new formulations.” KLE 2 identified a marketing opportunity to meet the needs of those who found that the 5mg strength was not effective enough and that the 10mg was too strong. There is evidence on the Internet of people attempting to split a Cyclobenzaprine HCL tablet to reduce its strength, with limited success. From late 2011 through early 2013, KLE 2 was the only manufacturer of the generic Cyclobenzaprine HCL 7.5mg strength, which was included in the Medi-Cal formulary and used for California workers’ compensation claims. In April 2013, the manufacturer Mylan released a generic 7.5mg strength, and it was also included in the Medi-Cal formulary. KLE 2 has a Medi-Cal price of $3.2153 per tablet; Mylan, $3.99. The brand name “Fexmid,” by Sciele Pharma, owned by Shionogi, has a Medi-Cal price of $4.4383 per tablet. Pharmaceutical pricing in the U.S. is unregulated; the more manufacturers there are, the lower the price to the consumer. In the case of the 7.5mg strength Cyclobenzaprine HCL, there are currently only two manufacturers, so the price will remain high until more manufacturers produce this strength or there is less demand for it. The 10mg strength, in comparison, has currently around 17 manufacturers. The average Medi-Cal price for 10mg is $0.1035. The lowest Medi-Cal price is $0.0468, from the manufacturer KVK Tech. (Refer to page 7 of "Understanding Pricing of Pharmaceuticals," available here under the Dialogue tab, for a Medi-Cal price comparison of 10mg Cyclobenzaprine HCL). The 5mg strength is manufactured by about 11 pharmaceutical companies. The average Medi-Cal price is $0.1586 -- that is down from Mylan's price of $1.3616 in 2006. The current lowest Medi-Cal price for a 5mg strength tablet is $0.0468, again from KVK Tech. I mentioned earlier that attempts to split either a 5mg or 10mg tablet in half have not been successful. It has been well documented that the coating applied to the 5mg and 10 mg Cyclobenzaprine HCL tablets does not allow them to be easily cut, regardless of the device used. The opportunity therefore for cutting a 5mg in half to take 1½ tablets of 5mg of Cyclobenzaprine HCL and accurately administer a strength of 7.5mg is not possible. The release of the 7.5mg strength addresses this need. Although the 5mg, 10mg and now 7.5mg strengths are the most commonly dispensed Cyclobenzaprine HCL medications, there are also other strengths, such as the 15mg and 30mg extended-release capsules manufactured by Mylan, which have a Medi-Cal price of $8.7899 per capsule. There are also the brand name “Amrix” extended-release 15mg and 30mg capsules manufactured by Cephalon, a subsidiary of Teva Pharmaceuticals, which have a Medi-Cal price of $25.0163 per capsule for both strengths. These 15mg and 30mg strengths further illustrate how a lack of competition for a specific medication leads to higher prices. Medi-Cal prices apply to all dispensers of California workers’ compensation medications, including pharmacies and physicians, and the same Medi-Cal maximum price has applied since 2007, as explained in my article, “The Paradox on Drugs in Worker’s Comp.” But the average prices paid, according to the WCRI study, are significantly higher than the Medi-Cal prices. The WCRI said prices paid for the 5mg and 10mg strengths were 35 to 70 cents a tablet, yet we find that the average Medi-Cal price was 10 cents for 10mg and 16 cents for 5mg. This discrepancy requires further clarification, because it appears that claims administrators have been paying significantly more than Medi-Cal's maximum price. The WCRI reported a range of between $2.90 and $3.45 for the 7.5mg strength. The $2.90 price is lower than Medi-Cal's prices and indicates that a competitive price was paid by claims administrators. If, as some have suggested, new strengths such as the 7.5mg are medically inappropriate, have claims administrators moved to remove the doctors who prescribe those strengths from their medical provider networks (MPNs)? Have claims administrators reported those doctors to the California Fraud Assessment Commission? Gavin said in the second point I pulled from his article that medications dispensed by physicians cost more than those in retail pharmacies, but obtaining prices of Cyclobenzaprine HCL from a number of retail pharmacies on the website goodrx.com are higher than the average Medi-Cal price paid for the same medications to dispensing physicians. (Prices on the website can change at any time and cited here for illustration purposes only. The Medi-Cal formulary can also change at any time in both its suppliers of medications and prices paid.) This analysis of the Cyclobenzaprine HCL medication further reinforces the need for claims administrators to be vigilant when dealing with pharmaceuticals. Let the buyer beware, too, when interpreting studies produced by organizations such as the WCRI.

To purchase services on a bundled or unbundled basis is a question that risk managers have debated for many years. In the past, conventional thinking among many risk professionals was to purchase services from distinct service providers. This decision was typically based on which vendors were perceived to offer the highest quality or lowest-priced services. In recent years, however, there appears to have been a shift in thinking, as bundled programs have become more popular. Technology advancements are helping drive this change. In large part, this is because of the improved efficiencies and outcomes that a packaged program can provide. Examining the process will underscore the benefits that bundled services offer. However, no two programs are alike, and customization must continue to be part of the discussion for any employer. The bundled approach As businesses strive for increased savings and productivity, services such as clinical consultation, pharmacy management, provider selection and bill review are more commonly sought from a single services provider and integrated into the overall claims management process. Robust technology systems tie these service components together and provide risk managers with comprehensive access to complete and real-time information like never before. All professionals managing the injury make better, more informed decisions and ultimately improve outcomes. Clinical consultation When a workers’ compensation injury occurs, early response and appropriate treatment are critical. Integrating clinical consultation services ensures that an injured worker talks with a nurse by telephone shortly after an incident occurs. The two parties discuss the injury and related symptoms along with other health conditions that might affect the injury and recovery process. Using his medical knowledge, the nurse can then discuss recommended treatment options. Depending on the severity of the injury, this can range from self-care to an occupational clinic visit to emergency room treatment. One of the key advantages to this approach is that it removes recommended treatment input from the manager or supervisor. Provider selection In a well-designed program, the nurse will have access to a listing of prequalified medical providers. These providers will have been selected based on a demonstrated ability to deliver desired outcomes on a consistent basis. The providers also will have shown that they understand the workers’ compensation system and employer expectations. This contributes greatly to return-to-work initiatives. Quantifiable physician rating programs are preferred over an expansive listing of physicians who have been selected solely based on their willingness to negotiate price. Pharmacy management Management of prescription drug costs can also be part of a bundled services package. Most successful programs will employ injury-specific formularies. These are listings of drugs approved for certain types of injuries or conditions. Given today’s increased use of opioids in treating work-related injuries, these custom formularies can be a valuable asset in preventing unnecessary or extended use of such powerful narcotics. A pharmacy management program can be structured so that a claims examiner receives an alert if a particular drug is prescribed or requested. The examiner can then place a call to the physician or pharmacist to see if there are alternative drugs available. Often, unnecessary or inappropriate drugs can be blocked at the point of sale. The use of network pharmacies can also add value. These pharmacies are selected based on quality, price and an understanding of program expectations. Drugs here are much preferred and often less expensive than prescriptions obtained from a physician’s office. Network pharmacists also understand the value of generic drugs versus brand name prescriptions and recommend these when appropriate. They are available to educate injured workers about the benefits or risks associated with any given drug. Bill review Bill review is becoming more commonly purchased as part of a bundled program. An effective bill review program goes beyond applying fee schedules and physician provider organization (PPO) discounts and is really driven by how information is processed. Bill review services seek all possible reductions on every bill. Accurate coding should be applied throughout the process, and it should reflect the lowest possible allowance for any code and provider. Additional savings are then typically charged as a percentage of savings. The more discounts obtained early on, the lower the service fee will be. Technology Technology has really increased the attractiveness of bundled service programs. Detailed and immediate information empowers professionals to make sound decisions and take steps to move a claim toward closure and return an injured employee to work more readily than ever before. As an example, when a clinical consultation nurse and claims adjuster share a single technology system, appropriate notes can be exchanged seamlessly and early details can be accessed that may later affect the case. Such a system also allows for a complete and up-to-date listing of prequalified medical providers and injury-specific drug formularies to be easily updated and maintained. This information is essential when an injured worker is seeking initial medical treatment or a claims adjuster is monitoring prescribed drugs. Also, when participating physicians and pharmacies are on a single system, medical bills are easily accessed and reviews performed more readily. Additionally, technology associated with these types of services can produce valuable data used to measure performance and identify trends. It is then possible to develop strategies to improve outcomes in care management and at the desk level based on quantifiable information. When services are bundled and one system ties them together, gaps in data are avoided. Conclusion Business trends will continue to evolve, as will debates over bundled versus unbundled services programs. However, today’s discussion is different than those in the past because of the advancement of technology and its resulting impact. Risk managers are looking to innovation to drive enhanced capabilities seeking improved efficiencies and effectiveness. Given the high stakes associated with increasing productivity and lowering costs, this debate is likely to intensify in the future, with technology adding zest to the conversation. This article first appeared on WorkCompWire.

The SMA research report The Next-Gen Insurer: Fueled by Innovation identified the major influencers within and outside the industry that are reshaping the business of insurance. It cautioned that if insurers chose to ignore, or even put off, the inevitable need to change along with the rest of the world, they would be taking a chance and creating risk for the survival of their businesses. Well, as it turns out, ignoring it is no longer an option. The new SMA research report, The Changing Auto Insurance Landscape: Influencers Driving Disruption and Change, underscores that disruption to the auto insurance industry is inescapable. Multiple influencers have converged, primarily from outside the industry, and are in the early stages of transforming the automobile industry and subsequently the auto insurance business. The new examples like driverless/autonomous vehicles, the connected car, car apps and shared transportation are disrupting traditional business, risk, product, pricing and customer assumptions while setting off the first wave of a broader disruption that will challenge the industry. Together, they reveal a growing wave of disruption in the auto insurance segment. This was emphasized by the announcements made at the Consumer Electronics Show (CES) in Las Vegas in early January 2015. Insurers reward customers with discounts for multiple auto policies, offer discounts for pay-as-you-drive (PAYD) or pay-how-you-drive (PHYD) programs and offer more discounts for additional coverage such as homeowners, umbrella, or others. The same is true for commercial insurance – business owners will look for a package of insurance that includes bundled discounts. But consider what Mark Fields, Ford's CEO, noted to the media at the 2015 CES show. Fields sees Ford as a mobility company rather than an automotive company, delivering a wide array of services and experiences via the auto instead of the mobile phone. This reimagined business model will have rippling effects across other industries, including insurance. So how will insurance see itself going forward? How will insurance reimagine itself? The impact will drive insurers to think bigger and reimagine their businesses as they ride this wave of change toward becoming a Next-Gen Insurer. The transformational potential of each influencer individually is great, but when combined they are game-changing. Each is individually beginning to disrupt insurance in varying degrees by redefining or reducing risk; redefining vehicle needs and uses; creating product and service needs; and affecting traditional revenue, pricing and operational models. Even more importantly, influencers are reshaping customer expectations by providing new experiences to create, retain and grow customer relationships and loyalty. Here are some potential implications for insurance:

• Will insurance models move away from the driver to the vehicle or manufacturer?
• What new services can be provided based on connected car or smartphone applications to engage with customers differently?
• Will auto driver usage data come from Google, Apple and auto manufacturers rather than traditional industry data providers? Will this new data redefine risk, pricing and underwriting models?
• Will insurers need to rethink partnership strategies to deliver new services?
• How will risk models and ultimately pricing models be affected?
• How will these affect operational, unit cost, revenue and profitability models?

The last two questions are especially significant based on the changes that are already happening in driverless/autonomous vehicles, the connected car, car apps and shared transportation. Using some of the statistics and projections from these examples featured in the new report, the hypothetical potential financial impact on auto premiums is profound. Collectively, the impact to the top 10 personal auto insurers that represent 70% of the direct written premium (DWP) could put 60% of existing DWP revenue into play. What's more, this does not include potential lost revenue because of new products and services that may be offered by other companies and industries. Even if the impact is only half of this, the operational and profitability models based on historical auto insurance assumptions are significantly disrupted. And those assumptions are starting to become irrelevant. Rather than waiting for automotive, technology and other industries to determine where this revenue will go, insurers must begin to plan today. Another inevitable result will be felt in the traditional customer relationships that will be further challenged by the emergence of new services and providers around the shared economy, connected car and driverless vehicles. Opportunities to strengthen customer relationships will be strained and diminished as these companies redirect customer relationships and revenue away from traditional insurers. The impact of these influencers; the emergence of new services; and their effects on customer relationships, old business models and revenue and profitability models are causing insurers to seriously consider these underlying, but very strategic questions: How are insurers going to recapture the disrupted revenue stream? Will it be through new products and services that generate new revenue in new ways? Will insurers become product manufacturers/underwriters for these emerging companies? Or will insurers adapt and become broader providers of insurance and service capabilities? How will you retain customer relationships and loyalty within this disruption? Are you preparing scenarios and plans to respond to these changes over the next three to five years? These changes have uncovered a challenging new business landscape. The inevitable disruption of auto insurance is taking the industry in new and surprising directions. How you respond is strategically important for your companies' relevance and competitiveness. So, fasten your seat belts! It is going to be a fast and interesting ride!