Tag Archives: disability management

What Is the Business of Workers’ Comp?

At the risk of alienating most people within the workers’ comp world, here’s how things look from my desk:

Most workers’ comp executives – C-suite residents included – do not understand the business they are in. They think they are in the insurance business – and they are not. They are in the medical and disability management business, with medical listed first in order of priority.

That statement is bound to lead more than a few readers to conclude I’m the one who doesn’t know what I’m doing. For those willing to hear me out, press on – for the rest, see you in bankruptcy court.

Twenty-five years ago, the health insurance business was dominated by indemnity insurers and Blues plans; big insurers like Aetna, Travelers, Great West Life, Met Life and Connecticut General and smaller ones including Liberty Life, Home Life, Jefferson Pilot, Time and UnionMutual. Where are those indemnity insurers today?

With the exception of Aetna, none is in the business; the only reason Aetna survived is it took over USHealthcare, or, more accurately, USHealthcare took over Aetna. The Blues that became HMO-driven flourished, as did the then-tiny HMOs – Kaiser, UnitedHealthcare, Coventry. Why were these provider-centric models successful while the insurers were not? Simple: The health plans understood they were in the business of providing affordable medical care to members, while insurers thought they were in the business of protecting insureds from the financial consequences of ill health.

The parallels between the old indemnity insurers and most of today’s workers’ comp insurers are frightening. Senior management misunderstands their core deliverable; they think it is providing financial protection from industrial accidents, when in reality it is preventing losses and delivering quality medical care designed to return injured workers to maximum function.

That lack of understanding is no surprise, as most of the senior folks in top positions grew up in an industry where medical was a small piece of the claims dollar. Medical costs were considered a line item on a claim file or number on a loss run, and not “manageable” – not driven by process, outcomes, quality.

Think I’m wrong?

Then why is the industry focused almost entirely on buying medical care through huge discount-based networks populated by every doc capable of fogging a mirror (and some who can’t)? Even with those huge networks, why is network penetration barely above 60% nationally? Why has adoption of outcome-based networks been a dismal failure? Why do so few workers’ comp payers employ expert medical directors, and, among those who do, why don’t those payers give those medical directors real authority? Why do non-medical people approve drugs, hospitalizations, surgeries, often overriding medical experts who know more and better?

Because senior management does not understand that success in their business is based on delivering high-quality medical care to injured workers.

At some point, some smart investor is going to figure this out, buy a book of business and a great third-party administrator (TPA) for several hundred million dollars, install management who understand this business is medically driven and proceed to make a very healthy profit. Alas, the current execs who don’t get it will be retired long before their companies crater, leaving their mess behind for someone else to clean up.

9 Key Factors for Drug Formularies

These remarks were prepared for testimony at a recent Assembly hearing in Sacramento on California’s consideration of a workers’ comp drug formulary.

Thank you for the opportunity to be part of this hearing on the potential development of a prescription drug formulary in California. My name is Mark Pew, senior vice president of PRIUM, a nationwide medication management company based in Duluth, GA, that has conducted business in California for more than 15 years and been a utilization review organization since 2009. I have followed the development of workers’ compensation drug formularies in other states since 2010 and, through observation and dialogue and corresponding deployment of services, have come to identify success criteria. I spoke on the subject at the National Workers’ Compensation and Disability Conference in November 2012 and at that time opined that California should consider a drug formulary. Since 2013, I have had several conversations with various California stakeholders to further that discussion, so I’m very pleased to see progress being made towardsthat goal.

Because I value the time of this committee hearing, I will be brief in what I consider to be important foundational tenets when constructing a drug formulary. I will forego any statistics or rationale for a drug formulary as that has already been well articulated in the bill’s analysis.

  1. A drug formulary should be about better patient clinical outcomes, not cost. My opinion is that if you do what’s right for the patient, all other stakeholders win by side effect. While much of the discussion leading up to this hearing has been about cost savings, it would be shortsighted to think that should be the criteria for success. In my opinion, true success from a drug formulary would be a decrease in disability, a decrease in addiction and dependence, an increase in return-to-work and an increase in the use of less dangerous treatment options. If the focus is on better patient clinical outcomes, there should be no stakeholder in California workers’ compensation that can argue that this isn’t a good thing.
  2. A drug formulary should rely on evidence-based medicine. Robust clinical studies that indicate what drugs should be used when, and what non-pharmacological treatment options should be tried in advance, should dictate which drugs require additional evaluation before prescribing. There are some very dangerous drugs that are generic and inexpensive, so the trigger should be what produces the best clinical outcomes in proper sequence. Step therapy, the idea that you start with the most effective, least dangerous option, is built into evidence-based medicine and should be the template for prescribers. The optimal approach to evidence-based medicine is the adoption of third-party, peer-reviewed standards that are regularly updated to reflect contemporary medical practice standards.
  3. A drug formulary should not handle new and legacy claims in the same manner. By “legacy claims,” I mean those claims that exist before the formulary rules come into effect. A patient taking his first opioid is different than a patient who has taken opioids for many years. While new claims require primarily process education for the stakeholders, there should be a remediation period for “legacy” claims to allow time for appropriate weaning and development of alternative treatment methods. Based on my observations, there should be a one- to two-year period between the rollout of a drug formulary for new claims vs. “legacy” claims. Both implementation dates should be unchangeably enforced to ensure action is taken. To be clear, any formulary that applies to new claims should also apply to legacy claims, albeit at a later date. Not applying the formulary to legacy claims would result in two different standards of care for injured workers in California depending on when the worker was injured. This is clinically inconsistent with the application of evidence-based medicine.
  4. A drug formulary will change prescribing behavior. The extra steps required for a drug that is not allowed by the formulary requires the prescriber to think through the best options as opposed to just maintaining past practice patterns (however they were developed). For example, if carisoprodol was excluded from the formulary, the prescriber either needs to validate the medical necessity through a preponderance of evidence or choose a muscle relaxant that is included (which likely means it has less dangerous side effects, has proven to be more effective for certain conditions and does not have dangerous drug-to-drug interactions). Given experience in other states, the prescriber will often choose the less dangerous drug included in the formulary, which should result in better clinical outcomes for the patient.
  5. A drug formulary should be enforced at the point-of-sale. Allowing drugs to be given to the patient and THEN deciding whether they are clinically appropriate allows the start of a potentially dangerous path to polypharmacy regimens that create more harm than good. A workers’ compensation drug formulary, just like those we see in group health plans, should be implemented at pharmacies within their point-of-sale system. The information provided to pharmacists will help them better communicate with the patient and prescriber as necessary for an option that is allowed by the drug formulary. One advantage for California is that pharmacy benefit managers (PBMs) and pharmacy chains already have experience with implementing a workers’ compensation formulary in other states. If California is modeled after that same process, there should be less up-front time required to develop processes for California.
  6. A drug formulary should be the result of consensus among all stakeholders. While reaching consensus takes longer, providing a seat at the table for every workers’ compensation stakeholder in a very transparent process will ensure a smoother implementation. It’s extremely important to the ultimate success of a drug formulary that everyone be part of the deliberation process. And if everyone is involved in developing the drug formulary, ultimate implementation will be more easily achieved. A point of clarification: while the process surrounding the drug formulary should be based on stakeholder consensus, the medical treatment guidelines upon which the formulary is built should NOT be based on consensus, but rather on the best contemporary medical evidence available. California stakeholders should focus negotiations on the rules governing the formulary, not on the medical principles that underpin it.
  7. A drug formulary should educate all stakeholders clearly and consistently. Clear (and free) education needs to be provided to all prescribers, all attorneys, all payers, all employers and preferably all injured workers as to how the drug formulary was constructed, how it will be implemented and how best to comply. Preferably, this would be led by the Division of Workers’ Compensation. This education should not stop in the lead-up to implementation but should continue in a feedback loop during and after to ensure that issues are identified and resolved quickly.
  8. A drug formulary should be simplified for ease of implementation. States with workers’ compensation drug formularies have made the choice of drugs relatively binary. For instance, a drug may be classified as one that is recommended for first line therapy (“Y” drug) or a drug that is not recommended as first line therapy (“N” drug) and should not be used unless it has been reviewed and approved by a second clinical opinion. The definition of what is and is not included in the formulary should not be narrative or interpretive, but something easy to read and — more importantly — to program into pharmacy benefit management (PBM), utilization review (UR), independent medical review (IMR) and bill review systems.
  9. Drug formulary rules should include a well-defined dispute resolution process and expedited appeal process. The goal of a closed formulary is to ensure that there are safeguards in place to prevent unnecessary medications from being dispensed to injured workers. The exclusion of a drug from the formulary (for example, an “N” drug) should not mean it cannot be utilized, only that the prescriber should be required to validate its medical necessity vs. drugs that are included. California obviously already has that infrastructure, which is why I felt in 2012 that California was a candidate for a workers’ compensation drug formulary. The onus should be on the prescriber to provide necessary evidence as to why this particular drug is required for this patient at this time. If that can be established, then that drug should be allowed to be given to the patient.

If the above steps are taken and appropriate time is given for their completion, a properly constructed and implemented drug formulary in California should result in cost savings to the system. The primary savings will emerge over time as fewer and fewer of California’s injured workers are lost to dependence, addiction and overdose. The ability to settle and close claims more quickly will be a positive result for both employers and employees.

A workers’ Compensation drug formulary could have a lasting and significant change in how prescription drugs are prescribed in California. I truly believe that by making everyone in the system think before prescribing, the injured workers will receive better care, and stress on the workers’ compensation system in California will be reduced.

I would enjoy being a continued resource to this committee as deliberations evolve. Thank you again for the opportunity to be part of this hearing.

The Best of Claims, the Worst of Claims

It was the best of claims; it was the worst of claims… the age of wisdom, the age of foolishness… belief vs. incredulity… hope vs. despair… etc., etc. The iconic opening paragraph from Charles Dickens’ A Tale of Two Cities makes one realize such conflicts do exist in the same space and time, albeit through different personal perspectives. Such is the reality in workers’ comp claims, where the single biggest factor in outcome is often the claimant’s attitude.

A client claim-audit project offers a jarring comparison between two claim files from different parts of the country. The claims exemplify how little control we actually have over an employee’s attitude in the disability management process, and show how vastly different the human tolls can be.

Both claims were in excess of 10 years old. Both involved exaggerated and evolving symptoms with eventual narcotic prescriptions for “pain management.” At approximately the same time, however, each took a different path.

One claimant found her own reasons and will-power to end the years she spent on prescribed pain-killers. She entered a drug treatment process on her own, eventually stopped her prescriptions and found a full-time job. The other claimant dove deeper into narcotic addiction and exhibited classic drug seeking behavior – such as “losing” his prescriptions and requiring early refills. He tested positive for other illegal drugs once his rightfully suspicious physician initiated a monitoring program.

There was no appreciably different set of claim management tools or tactics used for the claims – the stark difference in outcome came down to the want of the individual… an almost impossible aspect for the day-to-day claim practitioner or human-resources manager to reach or control. And, at the time of my audit, the claims were equally easy to close.

The woman free of prescriptions and carrying a full-time job was simply no longer a claimant. She was probably very happy to have her case closed and the dark chapter of her life over. We decided on an administrative closure of the claim.

On the other hand, the gentleman was barred from his erstwhile treating physician and pain management clinic for abusing meds and refusing a drug treatment program. A host of independent medical opinions indicated the man did not require further meds for the old injury. His everyday behavior was highly unfocused and erratic, apparently causing no attorney to take his WC case. He lived out of a tent in a relative’s backyard.

The man’s claim was also an easy administrative closure because of lack of any foreseeable prosecution. I have to admit his situation nicked at my coat of cynicism, the one layered thick from years in this profession. I hated the plain fact that he was a doomed victim of a WC system enabling his addictive conditions.

To my good readers, I ask: Which closure would you rather preside over?

Quick-Tip: Know When to Hold ‘Em But Don’t Wait to Fold ‘Em

Concept:

When reasonable medical treatment has no impact, quickly consider other options. A claimant with misguided intentions or extraneous problems and no desire to be “cured” might just be his own worst enemy and using the WC claim as a primary enabler.

Suggestions:

– Find appropriate ways to incorporate employee assistance programs (EAPs) or other specialty counseling services to support employees or WC claimants who have debilitating outlooks or possible addiction issues.

– Maintain a “no-fill” position on narcotic prescriptions. This will give you and your defense team at least an opportunity to block dangerous drugs before they are automatically initiated.

– Consider any “chronic pain” diagnosis to indicate maximum medical improvement (MMI). “Chronic” as a term arguably fits MMI. Try to settle the case under that premise. Fight the diagnosis and treatment plan, as a means to pressure settlement. If the plaintiff’s side argues against an MMI determination, then demand a treatment outlook and timeline that results in stopping pain medication.

– For claims with long-term narcotic situations, seek peer reviews to ascertain if the regimes are excessive and if a recommendation for detoxification is appropriate. Specifically set up medical evaluations to confirm addiction and substance abuse tendencies.

– Never presume a claimant with the wrong attitude and bleak outlook will be cured by any type of treatment. Know when you are wasting time and money. You must sense and act on this early. Don’t rely on adjusters to raise questions, as their inclination is to keep treating as long as medical opinion approves. You must take the role of disruptor.

Bottom line” It is distressing that workers’ comp enables addiction. Closing such cases is not always pretty. Learn from the disasters and take more responsibility in the future. Recognize that claimant attitude and outlook are of primary importance, for good or for bad.

The Daily Grind Is Good for the Mind

The human brain thrives on what work gives us: activity, routine, social contact and identity.

The act of working gives employees far more than just the benefit of earned income. The World Health Organization names it as a health factor that, when present, contributes to health and, when absent, can increase the chances of ill health. This is particularly relevant in the discussion about mental health. What is it about work that contributes to mental health, and why should employers and insurers consider the health benefits of work?

Activity

When human beings are engaged in doing things, areas of the brain related to attentiveness are stimulated. When someone is off work, it is harder to find regular daily activity—it is not as easy to find the many everyday behaviors we do when we are working. Work provides a structure that tells us what to do. We then engage in hundreds of behaviors every day. Being in the act of doing these behaviors keeps us healthy. When we are not working, it can be hard to answer the question: “So what did you do today?” This absence of activity can have a profound impact on a person’s sense of accomplishment and purpose, which has an impact on mental health.

Routine

Work forces us into a rhythm and regular behavioral patterns that are actually good for us, even if sometimes we may resent the structure. Our bodies and brains enjoy the routine and benefit from the repeated predictable patterns of behavior. If we don’t have something to get out of bed for, it can be difficult to get out of bed. When someone is off work for any reason, the lack of daily direction can have a significant impact on well-being.

Social contact

We spend more waking hours with the people we work with (when we are working full-time hours) than with the people we love and live with. Human beings as mammals are social creatures and seek and thrive on social contact. Neural activity related to social contact is crucial to mental health, and social isolation is a risk factor for mental illness. We are connected to our co-workers because we are social beings who are genetically programmed to monitor and build social connections. We rely on the hundreds of exchanges inside the social context at work to meet our needs for belonging and connection. When people are off work, they lose this continuing social contact, and the isolation has a significant impact on well-being.

Identity

Work gives us identity. When we work we have a title, a position, a clearly defined set of tasks and a label that provides information to the world about who we are, this informs us about who we are in relation to others, and in how we view ourselves. Loss of this identifier has a significant negative impact on self-esteem and self-worth, with a predictable risk to mental health. When employees are off work, it is hard for them to answer the common question: “So, what do you do?”

Any person facing unemployment experiences changes in all of these factors and is at risk for developing mental health issues. A person who already is experiencing mental health challenges, and then goes off work, may find it difficult to build steady recovery, because the essential health need of work is not present.

Many disability plans have an all-or-nothing approach to an employee’s ability to work. If employees are off work, they are deemed not able to work. If employees wish to find regular daily activity to help build their recovery, they may put their claim at risk. This approach to disability management may actually be making employees stay off work longer. The longer an employee is off work, the harder it is to return to work. Systems that do not allow employees who are on a disability claim to work, even to perform volunteer work, are preventing employees from tapping into the health benefits of working and may be contributing to needless work disability.

Employers may also have the mindset that an employee who is sick should be off work. When it comes to mental health issues, it is not best practice to use this all-or-nothing approach. The key here is for employers to have the capacity to address individual employee needs as they return to work or, better yet, have flexible processes and structures that allow employees to stay at work. Staying at work during early days of recovery could be part-time, with the disability benefit covering the balance of an employee’s income from salary.

Continuing activity, routine, social contact and identity build employee recovery and can reduce the cost of the disability claim. There is less work disruption, and continuity can be maintained for the employee and the family, the work team and the organization. This contributes to increased employee health. And healthy employees are productive and engaged employees.

Absence Management: Work Comp’s Future?

American employers will dispatch hundreds of staff members to an April gathering in Washington, DC, on corporate compliance issues. In all likelihood, hardly any CEOs in the workers’ comp industry are fluent in these issues, even though by the end of this decade they may change the direction of the workers’ comp businesses, separating the successful from the laggards.

A change for workers’ comp leaders hides in plain sight.  Claims have been declining in frequency by about 3.5% a year. It’s prudent to expect continued decline, as jobs become safer every year. Average claims costs, which used to bump up by more than 5% a year, aren’t growing beyond a few percent.

Meanwhile, the typical employer’s agendas of employee leave, disability management and wellness have been surging in scope and complexity. A few workers’ comp companies have already repositioned themselves to provide a broad array of solutions for these agendas.

Most workers’ comp CEOs appear to think these burgeoning workplace concerns have little to do with their company’s future. They may be right. Or they may be whistling past the graveyard.

Since the beginning of the Great Recession, demographic, technology and legal trends visible in recent decades began to accelerate in the direction of smaller work injury risk and larger non-occupational employee risks. Frank Neuhauser of the University of California at Berkeley estimated that for most workers it is more dangerous to drive to work than to be at work.

And notice the rise in employee leave benefits and the greater emphasis on wellness (despite deserved criticism of overselling that concept). Perhaps this is how Occupy Wall Street ends: not in a revolutionary bang, but a paid parental leave benefit and a worksite yoga studio.

The Disability Management Employer Coalition puts on the April conference as its annual problem-solving exercise for the Family and Medical Leave Act and Americans with Disabilities Act. In addition to these federal mandates, states and localities have been promulgating leave-related mandates by the dozens. In January, for instance, Tacoma, WA, enacted a law requiring employers to offer at least three days of paid sick leave come January 2015.

ClaimVantage, which sells absence management software, reports there are about 140 federal and state family leaves across the nation. When adding ancillary leaves like jury duty and blood donor leaves, the numbers rise to about 400. Paid family leave is gaining momentum to become a mandated benefit. The U.S. is the only high-earning country that does not offer paid leave after the birth of a child and only one of eight countries in the world that doesn’t mandate paid leave for new mothers.

According to the Integrated Benefits Institute, workers’ comp accounts for a mere 11% of all work absences involving a medical condition.

Legally mandated and voluntary benefits, disability accommodation, wellness and other employee-centric programs have by intertwining themselves raised their visibility in corporate C-Suites. No single, memorable descriptor today captures them successfully. Phrases such as “health and productivity management” and “total health” are bandied about. I suggest a simple term, “absence management,” in a report I wrote called “Seismic Shifts: An Essential Guide for Practitioners and CEOs in Workers’ Comp,” which WorkCompCentral published in February.

The absence business beckons

Although the labels will evolve, the need of employers for expert outside assistance to address their agendas is bound to grow. Will workers’ comp companies deliver solutions?

The employers most ready to ask for help include those with relatively large workers’ comp costs to begin with: middle- to large-sized employers. Workers’ comp claims payers today will process about $65 billion in workers’ comp benefits this year. Perhaps 15% of these benefits involve very large employers. A further 25% involve employers that are not that large yet incur workers’ comp losses of about $200,000 a year or more. Combined, these employers account for 45% of workers’ comp benefits. In other words, about half of the workers’ comp business today is with employers big enough to know they have a complicated absence management problem on their hands.

Their human resource executives and legal counsel have been telling CEOs that the compliance risks of government mandates can’t be ignored. The mandates have grown into an elephantine mass so thick that without expert outside assistance an employer has a high probability – say, 100% — of violating some law or other.

The more alert and early-adapting segment of employers tends to affiliate with the San Francisco-based Integrate Benefits Institute. Their individual staff members join the San Diego-based Disability Management Employer Coalition. These membership organizations feed the demand for training, resource networking and applied research.

Broadspire, ESIS, Sedgwick, York and perhaps other third-party administrators already market services to manage at least some aspect of non-occupational absences.

Workers’ comp claims payers can manage non-occupational absences because they already possess the needed core competencies. Pared down to the essentials, the workers’ comp claims payer does six things:

  • It processes claims.
  • It assists at some level of intensity in reducing the rate of incidents that end in claims.
  • It coordinates medical treatment and vocational recovery
  • It understands return to work.
  • It prices its product.
  • It complies with pertinent laws.

Absence management does basically the same things.

Further tying together workers’ comp and non-occupational absences in a workforce is the vital role of health behaviors of employees. The workers’ comp claims executive is acutely aware that health behaviors of injured workers often drive up claims costs. It is increasingly clear that smoking can be a more costly unsafe act than, say, distraction. Not that smoking precipitates an occupational or non-occupational injury (there’s scanty evidence of that), but that smokers are at more sharply higher risk to heal slowly and to become dependent on opioids in treatment.

The Integrated Benefits Institute has for years carefully analyzed patterns in non-occupational absences. It says that employers can and should use a coherent master plan for absences of all kinds, wellness initiatives and claims management.

In a phone and email exchange, IBI President Tom Parry suggests that workers’ comp claims payers think through their strengths in medical care, disability management and return to work. “These all are key parts to an employer’s strategy in taking a comprehensive approach to lost work time management,” he says.

Also, he advises, be prepared to benchmark and compare. Get hold of industry-specific benchmarking data across lost time programs, workers’ comp, FMLA and short and long-term disability. Become fluent in plan design terminology on the non-occupational side. Review the research literature on the cross-program impacts of health and a total absence management approach. IBI just published research on claims migration across programs, “Crossing Over — Do Benefits and Risk Managers Have Anything to Talk About?”

Why companies may hold back

A workers’ comp claims payer might enter the absence business because it does not believe that the workers’ comp industry is shrinking. For instance, the average cost of claims may, as it has in the past, grow faster than the reduction in injuries, leaving claims payers with an ever-larger pie. But in recent years average indemnity and medical costs have greatly slowed their growth and in some jurisdictions declined. And the incidence of lost time compensable claims continues to decline, the one clear exception being the island of all exceptions, Southern California.

Also, workers’ comp executives might say there is no apparent demand from their clients for non-occupational services. This sort of flies in the face of the experience of TPAs that have launched non-occupational service units. (True, they focus on the higher end of the employer market.) But the observation also doesn’t jibe with the workers’ comp industry’s experience with emerging services in the past. In instances of innovation, from medical bill review to pharmacy management to Medicare set-asides, large-scale and profitable services emerged after initial years of puzzlement. The fog banks eventually lift.

Then there are impediments in the broker community. It’s almost inevitable that absence management involves insurance products sold through benefits brokers and products sold through property and casualty brokers. They don’t talk a lot, even when working under the same roof. This complicates the work of product design and marketing.

Another reason to say no to opportunity is the challenging learning curve that absence management brings. But look at how the TPAs handled that. Those that have expanded their service offerings beyond workers’ comp claims all appear to forge alliances with, or acquire, servicing partners already steeped in some aspect of absence management.

It may be too harsh to equate workers’ comp claims payers with the railroad industry, which 60 years ago asserted that it was in the railroad, not the transportation, business. Perhaps too harsh, but there may be a lesson in that story.

The decline of work injuries

Injuries requiring at least 31 days away from work

year 1993 2015 2022 (projected)
injuries 450,000 250,000 175,000
Total employment 110 million 133 million 148 million