In my past pieces, I have written about the importance of a disruptive model of care and payment called Direct Primary Care (DPC) such as The Most Important Organization In Silicon Valley That No One Has Heard About. As the Direct Primary Care models scale, they become a great option for individuals and small business. However, larger organizations have another option at their disposal that I'm as excited about as the Direct Primary Care models (see this article for more detail).

Employers fed up with the annual "get less for more" health story when they get annual health plan updates have taken matters into their own hands. This has created one of the hottest sectors of the economy — onsite clinic providers. These are companies such as Concentra and CareHere providing corporations with primary care onsite at employer workplaces. Each of the onsite clinic provider CEOs I have spoken with have shared that their business is growing 100 percent annually. Reportedly, 20 percent of employers with over 1000 employees are implementing onsite clinic programs.

Faced with healthcare's hyperinflation which is hurting their competitiveness, employers have been trying an array of solutions. Led by IBM's study of their $2 billion annual health expenditure, the overwhelming evidence comes to a surprisingly simple conclusion: more primary care = healthier population = less money spent. Ben Franklin was right. An ounce of prevention is worth a pound of cure. Time and again, it's been shown that proactive primary care can reduce the most expensive downstream healthcare costs — surgeries, scans, emergency department and specialist visits — by 40-80 percent. Rather than waiting for small issues to become full-blown medical incidents, proactive primary care can make a big difference.

As a board member of the Healthcare Delivery Innovation Alliance, I have had the privilege of talking with the disruptive innovators. They're proving that employers don't have to endure the "get less for more" program anymore. Larger employers are finding onsite clinics have the same cost and health benefits as Direct Primary Care models, but it goes beyond just direct costs.

Where Do The Savings Come From?
In the U.S., we tackle healthcare in a way that would be the equivalent of having the best firefighters and firefighting equipment in the world and then we would pay firefighters more if there were more fires. Thus, you might find firefighters implicitly encouraging kids to play with fireworks on dry hillsides and allow buildings to be built with only one exit and no sprinklers. Consider that many hospitals are stuck measuring their occupancy like a hotel. That is, higher occupancy is perceived positively similar to the fictional firefighter hoping for more fires so they get paid more. Instead, the key to slaying the healthcare cost beast is to view expensive interventions such as hospitalizations (other than child birth) as a failure rather than something to be optimized. In the "do more, bill more" model we've been afflicted with, we get exactly what we reward. That is, full blown medical conflagrations that are lucrative for healthcare providers but devastating to healthcare budgets that we all ultimately pay for directly or indirectly.

One other benefit employers realize with onsite clinics is that their employees aren't wasting half a day going to a doctor's appointment. Not only is the clinic nearby, but the need to even go to the clinic is reduced. In the flawed fee-for-service model, a doctor can only be paid if you visit their clinic. Not surprisingly, many doctors will optimize for the patient to come to their office as frequently as possible as it allows for more billing events. In contrast, Direct Primary Care and onsite primary care physicians share the fact that as much as 2/3 of clinic visits don't require a face-to-face encounter. Rather, phone or electronic communication is sufficient. For example, one doctor shared how he hasn't seen a patient with Shingles in 5 years. These patients simply take a photo with their camera phone, email it to him and he can easily tell it is Shingles. He can then call in a prescription, saving everyone time and money.

Fortunately, onsite clinic providers aren't incentivized by convoluted health reimbursement models that reward the most expensive care possible. Both Direct Primary Care and onsite clinic models are rewarded for value and outcomes, rather than mere activity. Further, the smartest of these recognize who the most important member of the care team is — the individual. After all, the individual is the only person who goes to 100 percent of their appointments and the 99+ percent of their life spent away from the clinic is when they return to or maintain their health. Having implemented HealthIT systems in dozens of health systems, it's evident from a systems perspective that the patient is treated as a vessel to attach billing codes to rather than an equal member of the care team. It should be no surprise that legacy HealthIT is optimized around the flawed model, rather than the new models. Entire new categories of software emerge as healthcare providers recognize the most important member of the care team has largely been ignored.

The organizations that treat the individual as a member of the care team practice a "Collaborative Care" model that is making a real dent in healthcare costs. For the more difficult issues, such as obesity and substance abuse, the Collaborative Care model extends to other care providers. In other words, not only is the patient-provider connection important, but the provider-provider connection is also critical. For example, after a few years of trying various approaches, a large media company's onsite provider assigned health coaches to their employees and had rewards and penalties for following care plans. The coaches coordinate between the primary care physician (who is also rewarded for individuals sticking to care plans) and the individual to great effect. There's the dual win of a healthier employee and less money spent. Emerging technology solutions are making this much easier, so the entire care team (individual, coach and doctor) are in sync to achieve the health goal.

In summary, the most successful onsite providers are rewarded for being patient-centered, accountable and coordinated. In contrast, the flawed "do more, bill more" reimbursement model that is still pervasive implicitly rewards a provider-centric, unaccountable (e.g., it's good news when a sick patient comes back more frequently) and uncoordinated model. For traditional healthcare providers, they should heed the warning that providers are making newspaper industry mistakes. As more employers learn of the great benefits from a well-executed onsite clinic model, they will continue this Do it Yourself Health Reform trend that is happening one employer at a time.

This is the second in a two-part series on the need to regularly test your emergency, continuity, and disaster recovery plans. The first part in the series can be found here.

Test Exercise Roles & Responsibilities

Test Design Team
A Test Design Team is responsible for designing the test exercise scenario. These individuals should have in-depth knowledge of the organization and departments being tested, and are able to produce "credible scenarios" and yet stay on course with the test plan. Typically, the Disaster Recovery Coordinator serves in the capacity of the Test Design Team.

Assistance from a third party to help design your exercise can provide an independent evaluation of your exercise. Firestorm® acts as the Design Team for many organizations' test exercises.

The Simulation Team
The Simulation Team will guide the participants through the test or simulation.

Simulation Team Guidelines:

• Know the test plan and the messages
• Know where the test is going
• Know your resources
• Know your messages

Simulation Room:

• The simulation room should be located near the test room, but far enough away where occupants cannot be heard.
• Have a sufficient number of phones.
• Have white boards or flip charts for scribes to note the current status.
• Key messages need to be noted for tracking.
• The room needs to have adequate room and wall space.

The Facilitator
The facilitator is responsible for central coordination of the test exercise. Firestorm acts as the facilitator for many organizations’ test exercises. The facilitator is responsible for overseeing the accomplishment of targeted objectives, and conducting a briefing following the exercise. Facilitators should be knowledgeable in the execution of the plan(s) being tested. The facilitator provides overall guidance and coordinates with the participants and should assure that:

• Participant instructions are prepared.
• Full scenario and player scenarios, as well as a master sequence of events are prepared.
• Evaluation forms are prepared.

The Test Assistant
A Test Assistant may be assigned to assist the facilitator throughout the testing process. Evaluators should be very knowledgeable of the plan(s) being tested. Evaluators should be assessing command, control, coordination, and communication activities, and should be observant and objective. The role of a test evaluator is to:

• Monitor test play.
• Evaluate actions, not players.
• Determine if the objectives and related actions are being met.
• Identify problems to the facilitator.
• Track key messages and report findings to facilitator.
• Evaluator Activities:
• Attend the pre-test briefing.
• Assist in the development of evaluation form.
• Review and know the test plan.
• Know the objectives, narrative and messages.
• Know the test organization.
• Report early to the test.
• Be positioned near intake phones so you will see where messages go and how they are handled.
• If key messages are lost, advise the facilitator so the message can be resent.
• Assign certain messages to specific evaluators so they can track their progress.
• Note message processing on evaluator forms.

Test participants should be familiar with their specific roles within the plan(s) that are being tested. They should be specifically named as team members within the plan (s).

Messages
Messages drive the test, expose unresolved issues, and address the objectives. They add information to describe the disaster environment and/or situation. Messages stimulate action by the participants. Messages can escalate an initial (primary) problem and create secondary or tertiary problems. Example:

• Primary event — earthquake
• Second event — building collapse
• Tertiary event — building fire

Messages should influence action at least one of four ways:

• Verification — information gathering
• Consideration — discussion, consultation
• Deferral — place on a priority list
• Decision — deploy or deny resources

Message component examples:

• Time — what time is it to be delivered within the test?
• Who — who is the source of the message?
• Mode — how was the message transmitted?
• To Whom — who is the recipient?
• What — is the content of the message?

Followup
Following completion of the test, the facilitator should review the test plan with the participants and answers questions. If possible, audio-visuals should be used to add realism. The best time for a debriefing is immediately after the test. The test facilitator should facilitate the session. The purpose of the debriefing is to:

• Review and evaluate the test
• Provide feedback
• Review lessons learned from the test
• Obtain feedback from all participants on what worked and what didn’t work
• Note issues of command, control, coordination, and communication
• Have each function/business unit chair report on their group

Written Evaluations:

• Test participants should evaluate the perceived value of the test and their overall reaction to the experience
• They should evaluate the existing plan(s)
• They should evaluate the test
• They should identify the need for further training and tests
• They should make suggestions for improvement

The test facilitator should incorporate debriefing comments, evaluator observations and participant evaluations into a concise report of the event including lessons learned, issues that need correction, next steps, and additional training needed.

Test exercise analyses should include:

• An assessment of whether the test exercise objectives were completed.
• An assessment of the validity of test exercise data processed.
• Corrective actions to address problems encountered.
• A description of any gaps between the plan(s) tested and actual test exercise results.
• Proposed modifications to the plan(s).
• Recommendations for future test exercises.
• The report should be completed within five working days of the test and distribute it to all participants.

Summary: Keys To A Successful Test Exercise
Having a clear objective, management support, a realistic scenario, and active involvement are key to an exercise success. The updates and plan changes based on the lessons learned in the exercise must be made and shared. In evaluating a plan(s), look for:

• Top level support and involvement.
• Test design team expertise.
• Realistic test plan.
• Thorough preparation and attention to detail.
• Clear introduction and instructions.
• Participant feedback at debriefing.
• Follow-up.

This is the first in a two-part series on the need to regularly test your emergency, continuity, and disaster recovery plans. The second part in the series can be found here.

Introduction
The success of any emergency, continuity, or disaster recovery plan depends upon its routine testing, audits and updates. Plans cannot be expected to work properly unless they have been tested prior to their actual implementation in an emergency. Don’t wait until an emergency unfolds to see if the plans and procedures you’ve implemented are effective in responding to and recovering from a crisis event.

Everyone has a role in a crisis. Some are strategic, some are tactical. How decisions are made in a crisis is critical to the outcome. Because of this, the following holds true:

1. Practicing emergency response helps assure that the response can proceed predictably during a crisis or disaster;
2. Participation in exercises familiarizes everyone with the vulnerabilities, impacts, plans, mitigation strategies, incident management and crisis communications;
3. Testing allows problems or weaknesses to be identified and used to stimulate necessary and appropriate changes; and
4. Errors committed and experience gained during testing will provide valuable insights and lessons learned that can be factored into the planning/updating process.

Exercises empower critical decisions in a crisis. Exercises focus participants to determine:

• What changed?
• What do they know?
• Are they concerned? If so, about what?
• What is their plan?
• What will they monitor & how?

Process

Text Exercise Process
Test exercises serve several purposes. Exercises:

1. Allow management to use and assess plans and procedures to determine their feasibility and determine whether they will work under actual conditions.
2. Assess and measure the degree to which personnel understand their emergency response functions and duties.
3. Enhance coordination, communication, and proficiency among response staff.
4. Identify areas for improvement.
5. Increase the ability of management and staff to respond to emergencies.

Test Exercise Strategies

1. Test exercise strategies detail the conditions and frequency for testing applications and business functions, including the supporting information processing. The frequency and complexity of testing is based on the risks to a company or organization.
2. Tests can be as simple as testing the call tree in one or more plans. Or, the test exercise can involve an integration of multiple business areas, the IT environment and link to outside vendors and customers. The complexity of the tests should vary to ensure that all components of the plan(s) are adequately exercised.
3. Companies should participate in tests with their core service providers and test other critical components of the BCP. The strategy should include test objectives, scripts, and schedules, as well as provide for review and reporting of test results. Best practices in the industry support testing at least annually, or more frequently, depending on the operating environment and criticality of the applications and business functions.

Test Exercise Scope And Objectives

1. The scope of the drill or test exercise is determined by what is required to ensure the learning objectives are achieved by the participants. For example, if the objective is to test the ability of senior management to make decisions as specified in the emergency management plan, a tabletop exercise would be appropriate, although the same objective could be tested during a full-scale exercise.
2. Companies must clearly define what functions, systems, or processes are going to be tested and what will constitute a successful test. The objective of a testing program is to ensure that the plan(s) being tested can remain accurate, relevant, and operable under adverse conditions.
3. Testing should include applications and business functions that were identified during the In/Out/Across™ Analysis (BIA). The BIA determines the recovery point objectives and recovery time objectives, which then help determine the appropriate recovery strategy.
4. The scope of individual tests should be continually expanded to eventually encompass enterprise-wide testing, including vendors and key market participants. Achieving the following objectives will provide progressive levels of assurance and confidence in the plan(s).

At a minimum, the clearly stated testing plan should:

• Not jeopardize normal business operations.
• Gradually increase the complexity, level of participation, functions, and physical locations involved.
• Demonstrate a variety of management and response proficiencies, under simulated crisis conditions, progressively involving more resources and participants.
• Uncover inadequacies, so that configurations and procedures can be corrected.
• Consider deviating from the test script to interject unplanned events, such as the loss of key individuals or services.
• Be sure to inform participants of the objectives and goals of the test exercises.

Test Exercise Expectations

• Setting the proper expectations will minimize frustrations or inadequate participation from key stakeholders. As general guidelines:
• Test exercises scenarios should be realistic.
• Test exercises should consist of a generic scenario, and be indicative of an event that could happen in the area.
• Test exercises should not be too complex for the situation. Test exercises should compress a two or three-day real situation into a few hours, so they will be kept relatively simple with only a few objectives.
• One or two key threats should be the focus of each test exercise.

The test procedures should be checked periodically to make sure they include:

• Emergency response procedures, including escalation and notification processes.
• Alternate processing procedures, including security procedures at an alternate site.
• Full recovery procedures, including returning to normal processing.

Types Of Test Exercises
Testing methods should vary from minimum preparation and resources to the most complex.

Orientation/Walkthrough — Briefing or low stress training to familiarize participants with team roles, responsibilities, and expectations. Provides a good overview of new or revised emergency response plans. This type of exercise helps orient new staff and leadership. Planning cycle: one month; Test time: 60-90 minutes.

Drill — Test of individual emergency response functions that involve actual field responses. Examples include fire drill, tornado test, etc. Planning cycle: one month; Test time: 10-60 minutes.

Tabletop — Limited simulation or scenario of an emergency situation to evaluate plans, procedures, coordination, and assignment of resources. Advanced table tops will introduce messages and test assistants who can answer questions. Planning cycle: two-three months; Test time: 90-120 minutes; Debriefing time: 30 minutes.

Functional — Limited involvement or simulation by field operations to test communication, preparedness, and availability/deployment of operational resources. Planning cycle: three-six months; Test time: 90 minutes – 4 hours.

Full-scale — Evaluates the operational capability of systems in an interactive manner over a substantial period of time. Conducted in an environment created to simulate a real-life situation. Planning cycle: three-six months; Test time: 2 – 8 hours.

Know What You Are Exercising
Companies can establish exercise testing for a variety of reasons. Focus can vary from a single department to incident management, crisis management, and to company-wide and Board involvement.

Examples include:

• Response/Recovery Team Alert List — Contact information for all personnel assigned to the team. As this list can change frequently, team leaders should send a copy of it to each team member to review and update.
• Critical Functions List — Critical functions that each team must accomplish during a recovery effort. Team leaders should review these functions to determine that they are relevant.
• Team Recovery Steps — Strategies for recovery of critical functions; should be reviewed to validate that strategies are meeting current business objectives and reflect the best possible solutions.
• Functional Recovery Steps — Step-by-step procedures to complete the desired operational recovery; should be carefully reviewed and validated to determine accuracy and completeness.
• Vendor and Customer List — Contact information for critical vendors and customers; should be reviewed to determine list accuracy and completeness.
• Work Area Requirements — Critical resources required to support recovery at a designated work area site; should be reviewed to determine list accuracy and completeness.
• Off-Site Storage List — Critical records or resources stored off site; should be reviewed to determine accuracy and completeness.

Industry consultants spend a lot of time trying to understand agent and broker performance. This includes, but is not limited to, an analysis of prospecting, sales skills, customer relationship management and differentiated business development initiatives. The consultant's performance indicators focus upon a host of quantifiable measures including the number of prospect calls, proposals, new business hit ratios and retention.

Producer performance can be enhanced through the strategies, activities and the measures listed above. There is no question that a strategic business development plan which incorporates a differentiated sales process is essential. However, what is often overlooked is a producer's Emotional Energy — his or her Passion for the business.

In The 21 Indispensable Qualities of a Leader, John Maxwell states "if you look at the lives of effective leaders, you will find that they often don't fit the stereotypical mold. For example, more than 50% of all CEO's of Fortune 500 companies had a "C" or "C-" average in college. Nearly 75% of all U.S. Presidents were at the bottom half of their school classes. And more than 50% of all millionaire entrepreneurs never finished college. What makes it possible for people who might seem ordinary to achieve great things? The answer is passion."

Passion is derived from the Latin word passio and the Greek pathos which denotes deep emotion. Throughout history, passion controlled the notion of suffering and endurance. Very broadly, passion is defined as "a strong or intense feeling or emotion." Passion creates powerful energy. Typically, passion begins as a focused desire but eventually swallows all of the emotions it engenders.

The concept of releasing emotions in business has been around since the beginning of modern time. To our detriment, we chose to suppress it. Traditional business conduct had no place for emotions. Expressing passion in the business setting was considered unprofessional. There was a belief that the release of emotion in business deals made the engagement less effective and less productive. Times have changed. In fact, many of today's notable business leaders are very emotional people — Jack Welsh, Michael Dell, and Mark Cuban, to name a few.

Passion in business is loving what you do. No business professional should feel guilty for sharing emotions. After all, humans are emotional creatures. The key lies in learning how to harness and direct your passion so that it serves you in positive ways.

Research now substantiates that consumers make buying decisions based, in large part, on emotion. In fact, leading marketers use emotion to create enduring psychological bonds to link the customer to a product or service. Brand consultants often refer to passionately strong brands of companies like Urban Outfitters, Harley Davidson, Starbucks, Krispy Kreme and E-Bay.

Passion is a key differentiator for insurance agents and brokers. Passion comes across in verbal energy and body language. Unfortunately, passion cannot be trained. However, it can be drawn out. It comes from a love of business and a belief in one's unique process and package.

Let's study the career paths of Bruce and John, senior producers for the Discovery Point Insurance Agency. Bruce and John were boyhood friends who grew up in the same neighborhood, attended the same schools and participated on an undefeated football team. Bruce was the star quarterback, John was the fleet footed, energized wide receiver.

While they attended different colleges, they both returned to their home town to start their business careers. Bruce in commercial real estate. John as an insurance agent. At the age of 30, Bruce left a successful real estate career to join John as an insurance producer at Discovery Point. At the time Bruce joined the firm, John had a book of business of $200,000 of revenue. Bruce was an "average performer."

Seven years later, John's book had grown moderately from $200,000 to $300,000. In contrast, Bruce's career skyrocketed from the moment he joined Discovery Point. His book is now in excess of $900,000 of revenue. Although Bruce has seven years less tenure than John, his results are three times that of his best friend.

What is most interesting about the comparison of Bruce and John is the following:

1. Both individuals have the same Sales Coach
2. Bruce and John both use the same business development prospecting system and sales process.
3. They work similar hours.
4. Both individuals use the same center of influence network.
5. They make the same number of prospect calls.

However, the results differ dramatically from this point forward. What makes John "average?" What makes Bruce a "super star?"

At a recent sales meeting, John stated "I don't get it! Bruce and I do everything the same way. We have the same work ethic, network and business model. Why is my best friend so much more successful than me?"

The answer is passion. Bruce is passionate about everything he does. It was evident in the classroom and on the football field years before. Today, one is able to hear, see and feel the passion in Bruce's voice and body language. You can even see passion in his eyes. His passion comes through as a result of the following:

• Purpose and belief in what he is doing — his love of the business
• Confidence in his unique business model
• The emotion he puts behind each component of his deliverables

John Maxwell teaches us the four truths about passion:

1. Passion is a first step to achievement
2. Passion increases one's willpower
3. Passion changes you
4. Passion makes the impossible possible

Think of passion as the thermostat which measures the intensity of your emotions. The fuel for passion is your purpose. You cannot have passion without a clear understanding of your purpose in the business. A passionate and focused insurance agent or broker knows that his or her role is every bit as important as a CPA, attorney, investment advisor or banker. Passion is the fuel for your fire. It is the fire in your heart and soul. It impacts your life and those around you. "A leader with great passion and few skills always outperforms a leader with great skills and no passion," states Maxwell.

What is your Passion Index? Ask yourself the following three questions:

1. How long has it been since I could not sleep because I was so excited about a new business system, strategy or tool?
2. Do I find myself getting excited when I share my unique "business model?"
3. Is my energy contagious?

If you answered yes to all three questions, you have a high Passion Index. Congratulations! If not, do not despair. While there is no magic pill for passion, it can be drawn out of you with a clear understanding of, and appreciation for, your business purpose. "What makes it possible for people who might seem ordinary to achieve great things?" The answer is passion. The answer is you!

This article is used with permission under the copyright of Beyond Insurance.

There are hundreds of national and regional firms, including insurance companies, that compete to provide workers' compensation claims administration services for private as well as governmental self-insured entities. In California, there are nearly 500 private (non-public entity) organizations that are self-insureds, although only 35 of them actually self-administer their claims. Self-administered entities are generally very large organizations with open claims often exceeding $100 million in estimated future liabilities (EFL). The remaining self-insureds, including many of the largest self-insureds, rely upon a state licensed Third Party Administrator (TPA) to provide these services. In California, 98 Third Party Administrators are currently licensed to provide these services, although some of these are dedicated units that serve a single self-insured client.

Third Party Administrators provide much more than simply administration of workers' compensation claims. Their services and products include such things as: claims investigations, subrogation, loss control and safety programs, workers' comp training, risk management information systems (RMIS), management analytical summary reports, and expert witness testimony. In addition, many of the larger Third Party Administrators can provide a wide variety of clinical programs and networks such as bill review/utilization review (UR), nurse case management, pharmacy benefit management, Medicare Set-Aside services, surveillance services, subrogation, scanning services, etc. Make sure you designate which fees or costs should be an allocated loss expense payable to outside parties — not the Third Party Administrator. Accordingly, you should carefully weigh the advantages and disadvantages of using the Third Party Administrator's in-house vendor networks or other stand-alone organizations as you develop your claims management program. The Third Party Administrator relationship should be woven into your entity's claims management program procedures manual.

In choosing a Third Party Administrator to administer your self-insured claims, the location of the Third Party Administrator's office is often one of the key factors in your selection process. If your firm is concentrated in one locale, then a local or regional Third Party Administrator firm that is familiar with the local workers' comp jurisdictions, hospitals, physicians, attorneys, etc. could be very valuable. In addition, the Third Party Administrator assigned team of examiners and supervisors should be able to visit your facilities and meet with you to familiarize them with your workplace and provide on-site accident investigations, supervisorial training, and return-to-work assistance. Third Party Administrator familiarity with your business and/or manufacturing activities is a key factor in cost-effective claims management. On the other hand, if your firm has facilities spread out throughout a state or region, then a national or regional Third Party Administrator may provide the most-cost effective program to administer your claims.

Another key factor you need to make clear in choosing a Third Party Administrator relates to the proposed adjuster caseloads. Although there are numerous benchmarks as to what an examiner's ideal caseload of active indemnity and or medical-only claims should be, you need to be confident that the assigned claims management team is not overburdened with too many cases to handle. This factor includes the Third Party Administrator supervisors and support personnel as well. It's important to judge each competing Third Party Administrator on the basis of your expectation of examiner caseloads as well as their knowledge, experience, and skills in adjudicating claims.

Does the Third Party Administrator have minimal turnover of personnel? Who are their other regional clients? The California Self-Insurers' Security Fund (SISF), for example, has mature, complex indemnity-only cases going back to World War II. Therefore, our Third Party Administrator contracts spell out a maximum of 110 active cases assigned to each examiner. Your entity caseload benchmarks may differ depending upon the nature and mix of assigned claims (i.e. medical only, indemnity, inactive) as well as frequency and severity.

In evaluating a Third Party Administrator's performance, one red flag may be a high percentage of cases assigned by the examiner to defense attorneys. Applicant legal representation doesn't always necessitate the assignment of a defense attorney. Expert examiners can often manage a case without a defense attorney. Instead, it may make more economic sense to use Hearing Representatives, as an example. Within the past year, I have witnessed self-insureds with litigation rates as low as 3% and others with litigation rates as high as 88%.

There are many varieties of Third Party Administrator claims contract pricing models, including “cradle-to-grave,” but one of my favorites is the approach the California Self-Insurers' Security Fund utilizes. It's a cost-plus staffing model, wherein we pay our Third Party Administrators each month based upon an annual contract fee. With over 3,000 current Self-Insurers' Security Fund worker compensation claims, our Third Party Administrators are required to provide dedicated staff. The dedicated staff at each Third Party Administrator includes a Claims Supervisor (with a minimum of 10 years claims experience) who manages up to 5 Claims Examiners (with a minimum of 5 years claims experience). In addition, we specify that there be at least one Claims Assistant assigned to support up to 5 Claims Examiners. In addition, there is an assigned Unit Supervisor at each Third Party Administrator.

During the year as claims close, these assignment ratios may fall below the minimum number. If so, the Third Party Administrator is allowed to adjust designated (less than 100% Full Time Equivalent) employees in increments as small as a .25 Full Time Equivalent (FTE). The Third Party Administrators submit monthly Organization Charts to the Self-Insurers' Security Fund that identify each Claims Examiner's active/inactive caseload as well as the assigned Security Fund estate(s). You may desire to have the Third Party Administrator assign your Third Party Administrator Claim Examiners based upon the physical location or operational divisions where your workers' compensation claims occur.

To arrive at a fair Third Party Administrator contract pricing scheme, each year we "test" the expected regional salaries of the various workers compensation positions assigned to our account. There are a number of good benchmarks available. For each Third Party Administrator designated position (including management personnel), we factor the named position's annual salary including: employee benefits, office overhead, and a reasonable profit factor. That calculation leads to a specific total annual dollar amount for each Third Party Administrator position. Adding these up, including any partial Full Time Equivalent assignments, the Third Party Administrator contracts are adjusted in a uniform manner each year. The annual fee is paid in monthly increments.

As claim settlements take place during the year, the Third Party Administrator may be able to re-assign some of the designated staff as long as the Self-Insurers' Security Fund caseload ratios do not exceed our contract terms. This provides an incentive for the Third Party Administrators to settle claims, since the staffing model pricing remains in place for one year. The Self-Insurers' Security Fund's previous Third Party Administrator contracts were adjusted monthly based upon the number of open claims. This approach made budgeting difficult and served as a disincentive for the Third Party Administrator to close claims.

While there is no perfect or agreed-upon Third Party Administrator pricing model, I like the cost-plus staffing model as it serves to emulate an internal, self-administered program. Third Party Administrator employees are each identified by name and clearly understand that the client they serve is you. I've experienced many dedicated Claims Examiners over the years who have worked as hard as our entity's own employees in trying to achieve excellent cost-effective settlements. The Third Party Administrator examiners and client support team should feel like they are an integral part of your corporate team.

Other Third Party Administrator issues include the prompt reimbursement of any fines or forfeitures that occur due to the Third Party Administrator's error or oversight. In addition, the Third Party Administrator should also be required to disclose and all business relationships with vendors that are paid through the claim files with your monies. I also recommend requiring the annual submittal of the Third Party Administrator's Statement on Auditing Standards 70 (now Statement on Standards for Attestation Engagements 16) reports as well as the documented certification and on-going training of assigned Third Party Administrator personnel. For example, each of the assigned Third Party Administrator Claims Examiners in California should have at least 30 hours of training every 2 years to meet or exceed the Post Designation Training Requirements of the Department of Insurance as well as 9 hours or more of Division of Workers Compensation training each year.

For indemnification purposes, make sure the Third Party Administrator is required to maintain General and Auto Liability, Workers' Comp, and Blanket Fidelity, as well as Professional Liability/ Errors and Omissions coverage. Finally, in the event you terminate the Third Party Administrator's services, ensure that your Third Party Administrator contract spells out the termination without cause after a designated minimum notice. In addition, note in writing that your organization owns the claim files and that they can be accessed at any time. Hard copy claim file documents must be returned to you in a reasonable period of time in the event of contract termination. Periodically, it is valuable to have an independent claims audit conducted of your Third Party Administrator. It should provide you with assurance that it adheres to best practices. In addition, I believe that such claim audits should be used as a tool to improve your program by suggesting positive changes and improvements for both the Third Party Administrator and client whenever possible.

Importantly, don't let a low-bid mentality in evaluating Third Party Administrators hamper your opportunity to maintain an effective claims management program. You get what you pay for, and claim administration costs are still a relatively small component of ever-increasing workers compensation claim costs. A good, trustworthy Third Party Administrator that maintains a professional staff can save you a large portion of their fees and bring about significant savings in your workers' compensation claims management program.

And it’s Mandated for California Employers with 50+ Employees

The best way for employers to reduce the risk of successful harassment claims is to maintain and enforce anti-harassment policies, train the workforce on the prevention of harassment, and respond to concerns promptly and effectively. California law requires two hours of sexual harassment prevention training for managers and supervisors every 24 months. New supervisory employees must receive sexual harassment prevention training within six months of their assumption of a supervisory position, and thereafter, every two years.

The requirements apply to organizations that regularly employ 50 or more employees, or regularly "receive the services of" 50 or more persons. Independent contractors and temps are included in the 50+ number. A contractor is any person performing services pursuant to a contract (or an independent contractor) for each working day for at least 20 consecutive weeks in the current or preceding calendar year.

Who Is A Supervisor?
A supervisor is anyone who, exercising independent judgment, directs other employees, or has the authority (or recommends when) to hire, transfer, suspend, layoff, recall, promote, discharge, assign, reward, adjust grievances, or discipline other employees. The language "recommends such action" broadens the training requirement to employees who may not be classified as a supervisor for wage and hour purposes, but who have power or control over the work environment. This can even be someone in a "work lead" role.

What Topics Must be Covered in the Training?
The training must cover at least the following topics:

• Information and practical guidance regarding federal and state statutory laws about sexual harassment;
• How to correct sexual harassment and the remedies available to victims of sexual harassment
• Practical examples aimed at instructing supervisors in preventing sexual harassment, discrimination, and retaliation;
• The effect of harassment on harassed employees, co-workers, harassers and employers;
• How to report harassment complaints;
• How to respond to a harassment complaint;
• What constitutes retaliation and how to prevent it;
• Essential components of an anti-harassment policy;
• What steps to take when harassing behavior occurs in the workplace; and
• The employer's obligation to conduct a workplace investigation of a harassment complaint, with direction for leaders on how to handle complaints.

The training must be conducted via "classroom or other effective interactive training." The law sets forth specific trainer qualifications. The individual must be an attorney or an expert in human resources with at least two years' experience handling equal employment opportunity legal and policy matters, or a professor who teaches in this discipline.

This article is an excerpt from the December 2011 edition of From The Hotline published by Stuart Baron & Associates and Workers' Compensation Claims Control. It is used with permission under the copyright of Stuart Baron & Associates.

On July 16, 2003 in Santa Monica, California, a private passenger vehicle drove through a farmers market contacting vendor displays and pedestrians before stopping. The accident resulted in the deaths of 10 people, and 63 others obtained minor to severe injuries. The driver occupant was uninjured.

According to the National Transportation Safety Board (NTSB), the probable accident cause was failure of the driver to maintain control of the vehicle resulting from unintended acceleration. The National Transportation Safety Board's Highway Accident Report also said the lack of a barrier system to help protect pedestrians in the Santa Monica's Farmers Market from errant vehicles contributed to the accident severity.

The above incident is clearly an unfortunate tragedy resulting in bodily injuries and loss of life, significant property damage, and subsequent lawsuits.

This article will provide a risk management strategy for managers of farmers markets to assist in hazard recognition, thereby increasing property protection and public safety.

History Of Farmers Markets
The U.S. Department of Agriculture (USDA) has estimated the number of farmers markets has increased 79% exceeding 3,100 nationally from 1994 to 2002. In 2004, the number topped 3,700. The U.S. Department of Agriculture has no Federal enforcement or regulatory authority over farmers markets. It maintains a national database of market locations (inclusion is voluntary), and the database does not specifically record safety issues affecting farmers markets. Discretion of local authorities decides on market place location, permitting requirements, and applicable traffic control plans to ensure the market safety.

Regulatory Requirements
In California, the State's Department of Agriculture certifies farmers markets. The state has over 300 Certified Farmers Markets (CFM's) with 80 domiciled in Los Angeles County limits. Only certified farmers, governmental entities, or nonprofit organizations can operate a Certified Farmers Market within the state. Each individual vendor and market's operator must receive certification from their respective county's agriculture commissioner. Regulatory agencies' requirements vary in each state, county, and city regarding food and agriculture health and safety codes.

Farmers Markets Are A Valuable Part Of The Community
Farmers markets provide communities with nutritious, fresh, affordable, and local farm products, allowing farmers to increase profitability by directly selling to consumers. In 2000, 19,000 farmers sold their produce exclusively at farmers markets resulting in a larger share of direct profit to farmers.

Consumers also enjoy the opportunity to buy fresh, high-quality products direct from farmers at competitive prices. Farmers markets also foster food and community linkages by helping children to learn where their food comes from, bringing neighbors together, and permitting families to talk directly with farmers and growers who produce their food.

Farmers Market Safety
Farmers market managers play a key role in the overall safety of vendors, customers, and adjacent businesses. The time to plan for safety and security is prior to the market opening. Pre-arrangement with local fire, police, and emergency personnel regarding premises access and physical barriers, parking and traffic flow, crowd control, first aid, etc. need to be coordinated and contingency plans developed, reviewed, and practiced.

Next, a hazard assessment of specific risks needs to be performed. For a comprehensive list, refer to our Farmers Market Safety Checklist. Some of these farmers market areas to evaluate include:

Entry/Exit Ways

• Adequate barriers, orange warning cones, etc. provided to/from market areas.
• Pets not allowed in market areas.
• Use of bicycles, skateboards, roller skates, roller blades, and in-line skates, etc. prohibited and properly signed in market areas.

Sidewalks

• Walking/working areas provided with even surfaces and no potholes.
• Changes in elevation and abrupt surface edges provided with warning markings, signage, etc.

Parking Lots

• Parking stalls provided free of potholes and other obstructions.
• Curb bumps/parking blocks properly secured and highlighted.
• Vendor vehicles such as large trucks, vans, etc. provided with wheel chocks or blocks to help prevent movement.

Vendors' Equipment/Set-Up

• Market manager and/or assistant manager trained in emergency procedures, including first aid, emergency response, earthquake preparedness, bomb threat, etc. and coordinated with local authorities.
• Fully approved first aid kit and fire extinguisher provided at main location.
• Vendors required to have "standardized" display tables, supports, awnings, and umbrellas approved by the market manager.

Market Areas

• Vegetation, including tree branches, shrubs, etc. kept from obstructing sidewalks, parking lots, common areas.
• Lawn sprinklers installed away from common areas to prevent trip and fall hazards.
• Leaves, debris, etc. removed from walking surfaces to reduce "trip and fall" hazards.

Special Hazards

• Areas under construction, repair, or modification properly barricaded/fenced with appropriate warning lights and/or flashing beacons.
• Customers and employees restricted from fenced/barricaded construction areas.
• Night operations require adequate illumination along market areas, sidewalks, and parking lots. Lights and fixtures need to be continually inspected and maintained for proper operability. Additional security and police may be needed.

Additional Concerns/Comments

• Review special event planning with local officials to make sure premises access, crowd control, and traffic flow exposures have been evaluated.
• Coordinate security procedures and plans with local authorities such as theft prevention, crowd control, disorderly persons, preservation of cash boxes, etc.
• Provide adequate market management staff and maintain current list of volunteers and substitutes.
• Market staff trained in incident and accident investigations including documentation for report forms and contacting insurance adjusters and local authorities.

Protecting farmers markets from financial loss due to property damage, bodily injuries, vehicle damage, and employee accidents is essential. "Liability insurance is one of the major expenses for certified farmers markets. This cash demand can be a determining factor in whether or not a market gets off the ground. It is important that market organizers know something about obtaining the best deal for their insurance dollar." — From Organizing a Certified Farmers Market by the California Department of Food and Agriculture.

In addition to commercial general liability insurance, farmers markets need to secure insurance coverage for property, auto, directors' and officers', and workers compensation.

Special events or services such as "bounce houses" and pony rides may require contractual agreements and insurance certificates from vendors as well as specific event coverage.

Products liability concerns from consumption of contaminated food products or produce that are prepared or stored incorrectly need to be addressed. In addition, local health officials need to be consulted regarding rules about offering food or product samples, selling prepared, processed, and ready-to-eat foods, restroom facilities, etc.

The future growth of farmers markets throughout California and the nation is undeniable.

Operating markets provide communities with locally grown, farm fresh produce and the opportunity to interact personally with farmers and growers. Farmers markets also assist with promoting education on nutrition, healthy eating habits, improved food preparation, and increasing each community's economy.

For farmers markets to be profitable, a specific risk management strategy needs to be developed, implemented, and monitored. To help prevent and minimize losses to customers, employees, vendors, and damage to property and vehicles, a hazard assessment of specific risks needs to be conducted. Finally, farmers markets need to evaluate all activities for appropriate insurance coverages and contractual agreements.

Eat fresh and enjoy your next visit at your local farmers market.

References

Agriculture Marketing Service (AMS), U.S. Department of Agriculture, "Farmers Market Growth", February 2005, http://www.ams.usda.gov/farmersmarkets/farmersmarketgrowth.htm

FoxNews.com, "Car Plows Into Crowded Santa Monica Farmers Market", July 17, 2003: 1-3.

National Transportation Safety Board, "Rear-End Collision and Subsequent Vehicle Intrusion Into Pedestrian Space at Certified Farmers' Market, Santa Monica, California", August 3, 2004. http://www.ntsb.gov/publictn/2004/har0404.htm

University of California Davis, Small Farm Center, "A Guide To Managing Risks and Liability at California Certified Farmers Markets", 2003.

Using National Stone Sand and Gravel Association Resources For Enhanced Safe Production For Employers

At the end of the day, a company's rules, regulations, policies, procedures and implementation programs are only really successful when they can clearly be seen and understood from the vantage point of the hourly, "boots-on-the-ground" workers.

As safety professionals in the mining industry, we recognize that the ability to provide shareholder equity and return on investment while delivering a product that meets both client and governmental agency specifications is both daunting and challenging. Yet, there is an adrenaline rush when we can meet customer delivery schedules and still keep the plant productive and safe. This goal requires not only expertise and demonstrated commitment from top management, but also throughout the organization all the way down to the "boots-on-the-ground" employees. It is evident that a process-oriented, people-focused approach is needed to ultimately meet the company's imperatives and expectations as set forth by its board of directors.

The opportunity for mining professionals to deliver on these goals relies on the integration of various industry resources that make it possible to promote consistency, uniformity and objectivity in a corporate environment. At the end of the day, a company's rules, regulations, policies, procedures and implementation programs are only really successful when they can clearly be seen and understood from the vantage point of the hourly, "boots-on-the-ground" workers. The process becomes the art and science of safe production for the company. This article outlines practical ways to use National Stone Sand and Gravel Association resources for enhanced safe production to impact all levels within the company — but especially the hourly workers.

At a Harvard Commencement Address in 2001, former U.S. Secretary of the Treasury Robert Rubin stated, "Individual decisions can be badly thought through and yet result in success, whereas, alternatively, exceedingly well thought-through decisions might result in a lack of success ... But, over time, more thoughtful decision making will lead to better results, and more thoughtful decision making can be encouraged by evaluating decisions on how well they were made rather than on outcome."

This idea speaks to the law of unintended consequences, and leads to the importance of governmental rulemaking and its impact on our hourly employees.

It is through national associations such as the National Stone Sand and Gravel Association and respective state associations with active health and safety committees and governmental affairs groups to monitor, recommend and involve themselves in grassroots and lobbying efforts that we ultimately impact the behaviors of all employees in an operation. Many companies have successfully involved their legal and corporate health and safety departments, as well. It is also the manner in which production reality and expertise of health and safety professionals are shared with operational employees — through design, rulemaking acumen and mutual appreciation — that can make safety rules advantageous or burdensome for the mine operator.

As of July 2011, the U.S. Mine Safety and Health Administration (MSHA) has 11 agenda items in various stages of rulemaking, with four proposed and one in a pre-rule stage specifically targeted to the metal/nonmetal sector. While the remaining items are oriented to the coal industry, they too are worth tracking to gain a better view of governance over the mining industry as a whole (sSee Agency Rule list below).

Unified Agenda Issued July 2011 (Spring Edition)

Teamwork through the National Stone Sand and Gravel Association's Alliance with the U.S. Mine Safety and Health Administration helps with evaluating proposed rules. The National Stone Sand and Gravel Association's President and CEO Joy Wilson originally signed the alliance with the U.S. Mine Safety and Health Administration in February 2003. The date is significant because for the first time ever, the U.S. Mine Safety and Health Administration and an industry association jointly agreed to adopt health and safety performance goals with objective measures.

There is one key phrase in the agreement that truly sums up this pact: "We need a culture of prevention." With the renewal of the alliance in October 2010, both the National Stone Sand and Gravel Association and the U.S. Mine Safety and Health Administration are working to promote a national dialogue on worker health and safety by sharing information on best practices and exploring effective approaches to eliminate mining hazards. Last year, the alliance integrated a technical task force to assist in rulemaking considerations. With outreach, the alliance conducts the dialogue of safe production through this technical task force — a subset of the alliance consisting of operational professionals responsible for execution of safe production on a day-to-day basis.

The combined efforts of senior management at the meetings — Neal Merrifield, the U.S. Mine Safety and Health Administration's administrator for metal/non-metal, and Past National Stone Sand and Gravel Association Chairman Louis Griesemer, president and CEO of Springfield Underground — along with operational and safety professionals has made for some lively discussions, to be sure, but it also has resulted in profitable dialogues.

Opportunities abound to make a difference for workers in aggregates facilities. The MSHA/NSSGA Alliance offers best management practices and materials such as the "Code of Safe Practices" for benchmarking or adaptation to one's own corporate culture. Other examples include "Safety Pro in a Box," intended to provide meaningful compliance assistance to new (or existing) operators in the aggregates industry, and "Core Principles of a Safety Program." The Alliance also has developed a series of training documents for pre-production safety meetings at mine sites, specifically designed for the "boots-on-the-ground" employees. Additionally, the "Rip & Share" safety handouts (produced in each issue of Stone, Sand & Gravel REVIEW magazine) were developed by a data mining team (comprised of representatives from U.S. Mine Safety and Health Administration and National Stone Sand and Gravel Association member companies) that analyzed incidents at all metal/nonmetal mines. The "Rip & Share" features are aimed at helping mine employees identify and control the types of hazards that could potentially result in incidents and injuries at their mine sites.

There is one key phrase in the agreement that truly sums up this pact: "We need a culture of prevention."

Other important materials created to influence workers include the National Stone Sand and Gravel Association Safety Pledge, voluntarily signed by National Stone Sand and Gravel Association CEOs, which promises to reduce workplace injuries and illnesses at their operations, and the Occupational Health Program (OHP) developed by the National Stone Sand and Gravel Association's Health and Safety Committee.

The Occupational Health Program actually was created and made available to member companies far in advance of any U.S. Mine Safety and Health Administration rulemaking. It reinforces a healthy workplace for employees through the design, application and implementation of practices that minimize occupational health hazards in the workplace (noise, dust, fumes, mists). It also provides a sensible, thoughtful process to help an organization's management team evaluate ways in which operational decisions are made that result in favorable outcomes. These can be measured by such "dashboard" indicators as citations, citation frequency, injuries and their levels of severity, workers' compensation claims, training and morale surveys. Topics such as crystalline silica are specifically covered. And given the anticipated Occupational Safety & Health Administration rulemaking on crystalline silica, the foresight of the Health and Safety Committee in having delivered the Occupational Health Program, which showcases proper decision making based on factual data, should help to boost health and minimize corporate liability. This easily adapted program also complements the National Stone Sand and Gravel Association's "Mineral Definition and Identification Guide," which is another tool to educate workers in identifying and engineering best management practices for reduction in occupational exposures.

Even with the integration of the proposed rulemaking, industry best management practices and programs, collaboration with state associations and National Stone Sand and Gravel Association active membership, the application of new ways to influence, educate, train and deliver safe production knowledge and techniques is a continuing primary focus for our workers. It is these workers who are the ones making the rock products, overseeing plant delivery systems and delivering the outcome by which CEOs are measured by their boards.

The moral to this story might imply that boards of directors typically assume good outcomes are the result of good processes and bad outcomes, therefore, result from bad processes. Author Nassim Nicholas Taleb has stated that the quality of a decision cannot be solely judged by its outcome. A strategy must be judged as good or poor prior to the known outcome. And those who judge decision quality solely on outcome are often confusing skill and luck. To reiterate from Rubin's commencement address, "... over time, more thoughtful decision making will lead to better results, and more thoughtful decision-making can be encouraged by evaluating decisions on how well they were made rather than on outcome."

Even with emphasis on health and safety programs, policies, rewards, discipline and creation of a safe production "culture" in our industry, it is our miners who are our success. How do we achieve success? We achieve it through employee acknowledgement, involvement and ownership in the process. Success is borne of changing the corporate mindset to focus on the "willing miner" — the idea that people want to do a good job and take pride in their work and they do not want to get hurt — rather than approaching employees as resistant or looking to "bail out." In the end, this mindset makes it easier for folks to work better and more safely.

Take the opportunity to look at the operation from the "boots-on-the-ground" miner's perspective as they perform the decision-making process day to day. It is the true basis and checkpoint for thoughtful decision making that ultimately leads to better results for the company and CEO's dashboard for success.

In recent weeks we have seen an uptick in mergers and merger/acquisition rumors. Cigna's acquisition of HealthSpring, rumors about Aetna and Humana, United's supposed interest in Coventry and others seem to be fueling these rumors. So why is there so much activity, especially recently?

In a typical or normal economy, companies consider acquisition or merger when they see marketplace bargains or alternative approaches to more quickly achieve their objectives than growing their own operations. To buy or to grow has been the major question facing leadership. The marketplace pressures health plans for continued growth, particularly in the publicly traded sector which emerges as a major driver when growth isn't as spectacular as desired.

Today's health plan economy is not typical or normal. On the positive side, health care trends seem to be subsiding somewhat surprisingly while major changes with unknown impact from healthcare reform loom out in 2014. Rumors of mergers among the major players have been out there for many years. Consolidation has been expected, but the major catalyst for change has been health care reform. The marketplace wisdom seems to assume that bigger is always better. No one is satisfied with their growth history especially when there is a larger competitor out there. Whether or not that competitor is doing a better job, the pressure to be larger is far too enticing. Leader plans that want to fill in their presence in thin markets look for other plans that have a deeper presence.

The emergence of exchanges and the public's inability to effectively sift through more than a handful of different players further accelerates the market's desire for additional consolidation. Given more than four or five choices in a given market, and the various plan options offered by each, the plans in a local market ranked by size beyond the top four or five are at a significant disadvantage. It is doubtful they will get a fair shake in the exchange environment beyond their current membership. For example in Southern California where I live, the obvious winners will be Kaiser, Blue Cross of California (i.e., Anthem), Blue Shield of California, United (i.e., the former PacifiCare), and most likely HealthNet. Beyond these four Aetna, CIGNA, and some other smaller players will have to fight to get attention. This doesn't include the many self-funded options or very local choices offered in only a few communities.

Many in the industry refer to BUCA (i.e., the Blues, United, Cigna and Aetna). Ironically much of the merger hubbub is focused on these players. Kaiser should definitely be included in the mix, being one of the largest players although not in every state. I expect continued merger and acquisition chatter until at least 80 – 85% of the enrollment resides in a handful of plans. Anti-trust regulations will likely preclude this from shrinking to two or three plans, but further consolidation will continue for some time. Regional giants and major not-for-profit plans will probably be the slowest to merge with others, but they too will not be immune from this consolidation activity. Market-specific players (i.e., Medicare or Medicaid only plans) will also be involved in this process. One of the unintended consequences or outcomes of health care reform has been consolidation. Ironically, the concern about the "big and nasty" health plans that fueled reform has led to even bigger health plans. Hopefully, they are becoming bigger and better health plans!

This is the second in a two-part series on pain management and the true cost of compound medications. The first part in the series can be found here.

Issues With Quantity And Distribution
It is difficult to determine the quantity needed to constitute a day's worth of medication, as an amount needed per individual is incredibly subjective. Therefore, current medication distribution could be for amounts much larger than are needed, resulting in waste, as well as an increased price in medications based on quantity. Shipping and handling creates yet another problem. Included with the reimbursement price of a medication is a dispensing fee, which is a set rate depending on if the medication is name-brand or generic. There is no fee schedule or even recommended reimbursement for shipping and handling. Shipping and handling is generally only seen when medications are mass produced from pharmacies out of the area (mail order) and then shipped to injured workers based on prescriptions.

How are these prescriptions making their way to pharmacies not accessible by the injured worker? The likely source is from the prescribing doctor, which raises ethical questions. Does the doctor have a fee agreement or financial interest in the pharmacy? Does the pharmacy conform to California state law and have a current license to dispense medications? Are the employees of the pharmacy properly trained and approved to package and ship medications? Answers to these questions are difficult to answer, and pharmacies do not want to answer them.

Financial Issues
As previously stated, one need only to trace most medical "fads" back to one single item: money. Who can make money from the medical treatment, and more importantly, who is making money from the medical treatment? California Labor Code § 139.3 precludes physicians from referring patients for certain services if the physician or his immediate family has a financial interest with the entity that receives the referral. These "self referrals" are nothing new to the industry. For example, the introduction of surgical centers for outpatient procedures into the Workers' Compensation arena brought with them a plethora of doctors who grouped together or invested in various surgical centers. Within a short amount of time, surgery centers were found in all major metropolitan areas throughout the entire State. Fortunately, assemblyman Solorio's bill goes to great lengths to address this problem, adding prescription and pharmacy services to the growing list of items not allowed to be referred out when there is a financial interest.

Recommendations
What are some of the recommendations we can demand be implemented to reign in some of the problems discussed above? There is no single fix, other than the elimination of compound medications altogether. As this does not appear to be possible, some recommendations include:

• Establishing ceilings on reimbursement for medications including percentages of reimbursement from MediCal payment schedules or documented cost of providers who are filling medications. It appears AB 378 accomplishes some of this recommendation.
• Setting maximum reimbursements allowed based on bulk ingredient purchases, a set percentage for mark-up and a set maximum dispensing fee.
• Requiring use of NDC codes if available. If not, billing must include additional information including a description and/or invoice showing the price and related quantity of the ingredient. Otherwise a $0 reimbursement will issue. AB 378 will accomplish some of this recommendation.
• Encouraging carriers and Third Party Administrators to participate in a pharmacy benefit management (PBM) company. These companies handle billing, create pharmacy networks and even help control costs. pharmacy benefit management companies can often establish protocols for timely review within Utilization Review parameters. Case law allows for pharmacy benefit management companies.
• Reviewing the current requirement for average wholesale prices as discussed above and requiring payment based on the lowest available price from all manufacturers.
• Preventing physicians from referring services pertaining to compound medications to locations where the physician or immediate family member has a financial interest. AB 378 will result in adding compound medications to the list of goods under Labor Code § 139.3.
• Preventing liens from being filed for more than the statutory amount allowable under the fee schedule or set price amounts. Additionally, requiring lien claimants to provide all documentation needed to support their position at the time of the initial filing.
• Amending Labor Code § 4906.3 to require that liens cannot be filed until a medical bill is actually in dispute.
• Preventing the use of bulk ingredients that are not components of FDA approved drugs.
• Removing compound medications from use until they are subject to double blind testing and FDA approval.

Defenses
The options for defense of compound medications are relatively simple to use and to implement. Most require few steps beyond normal practices in the claims process and all can be quite effective. In implementing a strategy for defense, it is important to focus on your particular case, and choose the argument options best suited for your set of facts.

1. Use the Labor Code
   1. Labor Code § 4604.5(e) requires "other evidence-based medical treatment guidelines [be] recognized by the national medical community and that are scientifically based." When paired with Labor Code § 4600, treatment that is not supported by "a preponderance of evidence establishing that a variance from the guidelines is reasonably required", should be argued to not be substantial medical evidence.
   2. Labor Code § 4600.1 requires the use of generic medications unless the physician demonstrates they are not available or notes why the name brand medication is necessary. Make the doctor explain why compound medications are necessary.
2. Verify if the doctor comments on the effectiveness of medications to support ongoing use as is required. Most of the time, this does not occur.
3. When reviewing billing, ensure your bill review company/department checks to ensure all NDC codes are proper. Those that are not receive a brief explanation and $0 reimbursement.
4. Request copies of all prescriptions. Due to submission to the pharmacy directly, we often do not know the exact medication prescribed, the dosage and the number of refills, if any. We frequently see multiple pharmacies ship the same medications on a schedule — are they correct in doing so?
5. Ask for receipts or invoices on purchases for bulk medications and inactive ingredients — what are they paying for the medications and what is the mark-up they are asking for? This is discoverable information and can be used to argue price.
6. Insist all prescriptions are dispensed through a pharmacy benefit management (PBM) program and encourage clients to participate in one. See the Brambila decision.
7. Inquire about the prescribing doctor's financial interest or relationship with dispensing pharmacies. Most doctors use the same pharmacy, regardless of location of the applicant.
8. Never pre-approve medications. Always insist they be submitted to Utilization Review.
9. Request licensing information of the facility performing the services. Are they up to date? Are they complying with State regulations?
10. Ask for qualifications/training/certificates of the people creating the medications.

The more information you demand, the more likely pharmacies will be willing to negotiate, and the more information you will have for trial. They do not want you to know their bulk pricing and mark ups. Many may have staff that are not properly trained and some may have licensing issues. In order to not release this information, they will often drop demands for lien settlement by significant amounts and become much more reasonable in settlement discussions.

Compound medications are here to stay. However, just like any other "fad" in medical treatment, the more we become aware of the risks of the product and the defenses against use and reimbursement, the easier the claims process will be.

*Special thanks to Juan Pedroza and Steve Napolitano