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An Open Letter on the Oklahoma Option

I’m the founder and CEO of WorkersCompensationOptions.com (WCO), a company dedicated to workers’ compensation (WC) and its legal alternatives. This letter is intended to quell the concerns of employees in our client companies—employees who may have been distressed by the recent (mostly negative) publicity from ProPublica and NPR regarding options to WC in Texas and Oklahoma.

In case you only saw one installment from the Insult to Injury series, I’ll provide a quick summary. In 2014, the project’s authors started to assimilate massive amounts of data from their research concerning each state’s (and the federal government’s) WC system. In March 2015, the authors began releasing articles with an indisputable premise: Collectively, these systems need improvement.

That commendable beginning eventually gave way, however, to a hypothesis that is supported neither by reality nor by the overwhelming quantity of data the authors provide. Their conclusion (that employers are in cahoots with insurers to pressure attorneys, anonymous doctors and legislators into discarding the lives of an unfortunate few for the sake of bolstering corporate profits) completely misses the mark in pinpointing why so many WC systems are broken beyond repair. In fact, attorneys and doctors put at least as much pressure on WC systems as insurers, and any attempt to depict the medical and legal communities as innocent bystanders in the WC feud is simply too naive to be taken seriously.[1] I do not doubt the authors’ sincerity in addressing a serious societal problem, but I also do not believe they are equipped to understand the problem they sought—however earnestly—to demystify for their readers. Worse yet, I fear they have positioned themselves in the WC space in a manner that is only likely to retard the implementation of practical solutions.

This letter is prompted by the article on Oct. 14, 2015, which painted an inaccurate—even an irresponsible—picture of both Texas nonsubscription (TXNS) and the Oklahoma option (OKO). As that article’s title (“Inside Corporate America’s Campaign to Ditch Workers’ Comp”) is lengthy, I’ll shorten it to CDWC going forward.

Texas Nonsubscribing Employees: What Can We Learn?

Texas is exceptional in the WC world because it has, for more than a century, offered employers a viable alternative to WC. Of approximately 380,000 employers in Texas, roughly two-thirds subscribe to a traditional WC system; the other third are nonsubscribers who develop their own models. That’s about 120,000 different systems, and there is plenty to be learned. We’ve seen various organically grown components develop from these disparate systems, many of which superficially resemble WC. Despite those similarities, however, industry experts understand how counterproductive it is to make unilateral comparisons between TXNS and WC.

The authors of CDWC didn’t get that memo.

Of all the various lessons learned from diverse TXNS models, one runs counter to conventional WC dogma: Employers can protect themselves while delivering superior care for employees at a fraction of the cost of WC. Eliminating the inflated costs associated with abusive practices that run rampant in WC is a critical component of that particular lesson.

Because the CDWC authors insist on judging TXNS through the lens of WC, TXNS looks to them like a system that would appeal to skinflint employers who simply do not care whether their employees get hurt. However, because employees of nonsubscribing companies can sue their employers for tort, the decision to opt out of WC is likely to be penny-wise and pound-foolish for employers who do not take measures to ensure the safety of employees. The CDWC authors’ failure to unpack the importance of tort negligence means many readers will come away from the article without understanding that a typical $50,000 payout in WC could easily be either $0 or $5 million in TXNS—depending on who is at fault for the accident. Even more disappointing is CDWC’s attempt, in a one-sentence paragraph, to gloss over one of WC’s most dangerous shortcomings: the extent to which the no-fault arrangement between employers and employees has removed incentives for safety in the workplace throughout the country.

If you are an employee of one of our Texas nonsubscribers, rest assured that your employer has every reason to minimize workplace accidents and to take very good care of you if an occupational injury occurs.

In a nutshell, your interests are aligned with your employer’s—another critical lesson we’ve learned from TXNS.

Oklahoma Option Employees: A Whack-a-Mole WC System Led You Here

ProPublica and NPR harp on a consistent theme throughout the Insult to Injury series: WC is broken. We at WCO agree, and Oklahoma may provide the single best example of how and why a state’s WC system becomes unsustainable.

The WC ecosystem is made up of five major communities: insurance, medical, legal, employer and employee. Abuse within the system by any of these communities leads to adjustments to the boundaries of the system. Throughout the Insult to Injury series, the authors go out of their way to sidestep the discussion of systemic abuse. They even attempt to dismiss fraud by citing a study that minimizes its role. Abuse and fraud in WC are, in some ways, analogous to speeding on the highway: Almost all drivers abuse the speed limit, but very few are issued citations. Similarly, the cases of clear-cut fraud in WC only reflect a small portion of the amount of abuse going on. But even if we allow the authors to exclude all instances of clear-cut fraud from the WC conversation, we are still left with rampant abuse driven by insidious systemic incentives.

For decades, abuses and inefficiencies within the WC system have led to each of the five communities touting the need for major reforms—at the others’ expense. Real reform threatens each community, which leads to stalemates in negotiations. Major upheaval has been avoided via the compromise of pushing and pulling the system’s boundaries, resulting in a decades-long game of whack-a-mole being played across the nation. If one voice cries, “Data shows an alarming trend in opioid abuse,” that mole gets swatted by requiring more medical credentials for prescribing pain killers. When another shrieks, “Overutilization is surging,” that mole is whacked through costly and time-consuming independent medical examinations. When someone else observes, “Our disability payouts are higher than neighboring jurisdictions,” that mole prompts us to lower disability payouts. Immediately, a fourth voice shouts, “Pharmaceutical abuses make up 8.4% of total costs,” and that mole persuades us to introduce drug formularies. But there isn’t even a moment of silence before another voice remarks, “Our analysis shows dismemberment payouts in this jurisdiction are lower than those of our neighboring jurisdiction.” That mole gets whacked by proposing legislation to increase dismemberment payouts—legislation that is dead on arrival.[2] At some point, we have to realize the moles are multiplying faster than we can whack them. (If my commentary doesn’t apply to other jurisdictions, I’m happy to restrict it to Oklahoma and Texas because writers can best serve their readers by acknowledging the limitations of their own expertise.)

Even if we concede that the changes detailed in the paragraph above aren’t necessarily bad (which I’m not conceding; I’m just trying to be polite and move the argument along), they demonstrate a persistent pattern of outcomes, inclusive of abuse, inherent in any hierarchical bureaucratic system. Regulators are busy reacting to entrenched abuses while market participants find new and exciting ways to game the system. This futile game of whack-a-mole is endless.

The Sooner State had a front row seat to witness what TXNS accomplished—both the good and the bad.[3] With that first-hand knowledge, the Oklahoma legislature has finally provided the state—and the country—with an opportunity to see whether real change can restore function to a malfunctioning system. While WC stakeholders assure us they are only a few more whacks-at-the-mole away from making WC hum, Oklahoma lawmakers have written a new chapter in the history of workplace accident legislation. The OKO is neither WC nor TXNS.

The brilliance of the OKO is that it doesn’t attempt to overhaul a broken WC system. The legislators effectively stepped away from that decades-old stalemate. Instead of an all-out overthrow, they left WC in place and created an option for employers who were willing to try something new—which is exactly how WC itself was introduced a century ago.

Because the OKO is substantially modeled on TXNS, it is easy to see why the CDWC writers conflated the two in their analysis. The errors in CDWC concerning ERISA’s applicability, employee benefits and appeals committee processes in Oklahoma are all presumably honest mistakes made by writers who, in their zeal to distinguish TXNS and the OKO from WC, failed to distinguish TXNS and the OKO from each other.

Nevertheless, it’s important for employees to understand that TXNS varies dramatically from one employer to another, and many of the rules concerning TXNS do not apply north of the Red River.

Although the CDWC authors misleadingly couple TXNS and the OKO with respect to ERISA’s applicability, ERISA plays no direct role in occupational accidents in the OKO.[4] We’ll be happy to get you a legal opinion on that, but for our purposes regarding CDWC, take my non-legal opinion as on the record. If others disagree, they should go on the record, as well. While ERISA has served employers and employees well in TXNS, its role in the OKO is only implied (if that). We are free to use it where we wish, as long as we are compliant at the state level.

Presumably tied to their ERISA misapplication, the CDWC authors assert that “benefits under opt-out plans are subject to income and payroll taxes.” Such tax advice is unusual from investigative journalists without citation, and I have asked the authors to share their source. Although the jury is still out on this tax issue, it is a point the CDWC authors must distort to substantiate their otherwise baffling claim that the workplace accident plans of OKO employers “almost universally have lower benefits.”[5] If any OKO plans really do offer benefits that aren’t at least as good as those provided by WC, they’re illegal. That’s how the legislators have written the law, and it’s what they’re dedicated to achieving for workers, regardless of obfuscations invoking TXNS, ERISA and unresolved tax implications.

The authors of CDWC also completely misrepresent appeals committees for at least a majority of OKO employers. The authors overlook a dramatic improvement to employee protection that the OKO makes to TXNS when they claim that appeals committees in Oklahoma work analogously to appeals committees in Texas: “Workers must accept whatever is offered or lose all benefits. If they wish to appeal, they can—to a committee set up by their employers.” That’s dead wrong. Executives at each of our OKO employers are fully aware that, in case of an employee appeal, the employer has nothing to do with the selection of the appeals committee panel members or the work they complete. The process is independent from the employer and extremely fair.[6] The CDWC authors would do well to read Section 211 of the law more carefully.

On the subject of benefit denials, I’ll share a single data point from our OKO book: To date, we have denied exactly one claim. This is a nascent system, so we must be very careful in drawing actuarial conclusions. Still, our company has led more employers from traditional WC into the new OKO than any other retailer, so we have a bit of credibility to offer on this subject. The point of the system isn’t to deny benefits to deserving employees but to ensure benefits are delivered more efficiently. The system is working.

The CDWC authors only provide one OKO case study, Rachel Jenkins. Strangely, they lump Jenkins in with four TXNS case studies. The Jenkins case is still being tried. We will withhold opinions—as we hope others would—until a more appropriate time.

As a reminder, while the OKO law is stronger today than ever, if it were to be deemed unconstitutional by the Oklahoma Supreme Court, we would have 90 days to get everyone back into traditional WC (per Section 213.B.4.).

Next: Vigilance and Diligence

My comments are mine and mine alone. I do not speak for any associations or lobbyists. I have no interest in debating those who inexplicably assume that any alternatives proposed to a failing system must stem from sinister motives. However, I encourage anyone (from prospective clients to employees of existing clients) with questions or concerns to call me.

Another option for learning more is to click here and watch a formal debate regarding the OKO. This footage was shot in September 2015. It features Michael Clingman arguing against the OKO while I, predictably, argue for it. One thing you can’t miss in that video is my desire to oust most attorneys from the scene. To help explain, I’ll adapt a quotation from John F. Kennedy (who was discussing taxation) to my own area of concern (the well-being of employees): “In short, it is a paradoxical truth that employee outcomes from increased WC protections are worse today, while economic results suffer, and the soundest way to create higher and better standards of living for employees is to eliminate these abused protections.” For philosopher kings, the theory of the OKO may not sound as good as the theory of WC, but when it comes to practical realities the results demand everyone’s attention.

To summarize my primary criticism of Insult to Injury, it simply hasn’t done enough. The story it tells is insufficient and smacks of partisanship and ideology, two biases that ProPublica’s journalists allegedly avoid. WC is substantially more complex than a corporation-out-to-exploit-its-workforce short story. Ignoring abuse in each of the communities in a five-sided WC debate demonstrates a lack of journalistic impartiality and a stunning deficiency of perception. Moreover, to my knowledge, ProPublica hasn’t crafted any relevant suggestions for legislation, simply leaving its readers with the vague and implicit notion that federal oversight is needed. If that is the goal of Insult to Injury—to provide one-sided, emotional yarns alongside a treasure trove of data, hoping it will all spur some federally elected officials to create real change at long last—then I suspect ProPublica will still be holding this subject up to the light of opprobrium upon the retirement of each of the series’ authors.

We do not aspire to win over the authors or even their followers. We will focus our energies each day on providing the best workplace accident programs for employers and employees alike. Our results should speak for themselves.

Finally, I am not an attorney, and nothing in this letter should be taken as legal advice.

Sincere regards,

Daryl Davis

Footnotes:

[1] With medical providers, overutilization is always a concern. Click here and watch the video from the 12-minute to the 15-minute mark for a detailed description of rampant WC abuse by surgeons who provide unnecessary and damaging back procedures. If the workers weren’t disabled prior to the surgeries, many were afterward. As for the legal community, simply view slide 73 of the NCCI’s 2013 Oklahoma Advisory Forum. WC disability payments, which is where attorneys get their cut, were 38% higher in Oklahoma than in neighboring states—not because jobs are 38% more dangerous in Oklahoma than in Kansas or Texas but because Oklahoma attorneys are 38% more effective at gaming the state’s WC system.

[2] Alabama SB 330—which was prompted by Insult to Injurynever got out of conference. From what I could gather, lengthy negotiations between several different interest groups led nowhere, with the Alabama Medical Association at the center of this particular stalemate. Not surprisingly, the two special sessions called by Alabama Gov. Bentley in 2015 were strictly focused on the state’s budgetary crisis; this bill was never discussed.

[3] The final Texas case study offered in CDWC deals with Billy Walker, who fell to his death while on the job. The upside to TXNS is his estate’s common law right to pursue a tort lawsuit against his employer. The employer could have been ordered to pay Walker’s estate a settlement in the millions, but the employer filed bankruptcy before any such judgment could be awarded, which is plainly an unacceptable outcome. This demonstrates a lack of surety—the single biggest problem in TXNS. OKO addresses this issue in various ways, most notably in Section 205 of Title 85A, which guarantees surety for injured workers.

[4] For the non-occupational components of your OKO program, ERISA does apply.

[5] Per Section 203.B. of the statute, compliant plans “shall provide for payment of the same forms of benefits included in the Administrative Workers’ Compensation Act for temporary total disability; temporary partial disability; permanent partial disability; vocational rehabilitation; permanent total disability; disfigurement; amputation or permanent total loss of use of a scheduled member; death; and medical benefits as a result of an occupational injury, on a no-fault basis, with the same statute of limitations, and with dollar, percentage and duration limits that are at least equal to or greater than the dollar, percentage and duration limits contained in Sections 45, 46 and 47 of this act.” (Emphasis mine.)

[6] Details of OKO appeals committee procedures are generally misunderstood—for now—by plaintiffs’ attorneys (and, apparently, investigative journalists). Attorneys frequently assume that, because the employer foots the bill, the employer controls the process. For a peek at how the appeals committee process really works for a majority of OKO employers, those curious should watch this video.

pill

The PBM vs. the Drug Manufacturer

In today’s American healthcare system, employers can’t order Lipitor directly from Pfizer fortheir employees. Instead, employers and employees are forced to buy drugs through a middleman, the pharmacy benefits manager (PBM).

Fingers have long been pointed in both directions to blame the other for the high cost of prescription drugs. The PBMs blame the drug manufacturers, and the drug manufacturers blame the PBMs, not unlike two children arguing on the playground.

Eli Lilly, one of the world’s largest drug manufacturers, recently claimed that the average price increase on Humalog, its injectable insulin used to treat diabetes, has only been a modest 1% to 2% annually over the last five years. Tim Walbert, the CEO of small drug manufacturer Horizon Pharmaceuticals, said in a recent interview, that he expects the company’s actual price increases to be 4% or less over the next year.

PBMs, on the other hand, portray the drug manufacturers as greedy price gougers that fail to keep prescriptions costs under control. Anthem, one of the nation’s largest health insurers, works hard to convince its employer clients to leverage the buying process by joining Anthem’s negotiated PBM program with Express Scripts Inc. (ESI) instead of negotiating a direct deal with a PBM. This month, however, Anthem came out swinging, accusing its partner ESI of more than $3 billion in overcharges – all of which were passed along and paid by clients.

Who should the employers believe is at fault? Employers are aware of their prescription benefit bills. They clearly see that costs are escalating at an unprecedented rate. What can they do about the problem? How can they succeed if a buyer as large as Anthem failed for its thousands of employer clients?

Today’s healthcare market only permits employers to buy the employee drugs from two different platforms. They can choose to buy through a PBM partnership (Anthem partnered with ESI) or a large benefits broker’s partnership with a PBM. Secondly, they can choose to work with a consultant for high-level advice and contract directly with a PBM.

Regardless, the employer always gambles that it knows more about the PBM’s 120-page contract, pricing calculations and methodology than Anthem apparently did. It is a monumental sign of the times that Anthem publicly blamed ESI for its failure to contract effectively with the company, leading to overcharges for its clients.

Our healthcare system today is broken by design – not necessity – and virtually everyone in the chain lacks the incentive to fix it. In fact, people are financially motivated to maintain the status quo. Until drugs can be purchased directly from the manufacturers for a direct discounted price, employers are trapped in our national prescription benefit system.

Would a Formulary Help in California?

Introducing a closed pharmaceutical formulary into California workers’ compensation could produce two main benefits. The first is to further lower the cost of pharmaceuticals by either restricting or eliminating certain medications. The second is to reduce the possibility of drug addiction.

An October 2014 California Workers’ Compensation Institute (“CWCI”) report titled, “Are Formularies a Viable Solution for Controlling Prescription Drug Utilization and Cost in California Workers’ Compensation” states that pharmaceutical costs could be reduced by 12%, or $124 million, by introducing the Texas workers’ compensation pharmaceutical formulary.

To achieve the second benefit, an assembly member introduced AB1124 to establish an evidence-based medication formulary and wrote, “The central purpose of our workers’ comp system is to ensure injured workers regain health and get back to work. When workers get addicted to dangerous medications, goals of the program are not met. An evidence-based formulary has proven to be an effective tool in other states and should be considered in California.”

To confirm whether these benefits could be achieved through the introduction of the Texas formulary, a review of the CWCI study and the opioid medications available under the Texas formulary was conducted. The findings, summarized below, suggest that the answer is no.

Although California does not restrict or limit medications in treating injured workers, it does limit the prices paid and provides an opportunity to question prescribed medications that appear to be out of the ordinary. Medi-Cal prices (California’s Medicaid health care program) are used for establishing the maximum prices for workers’ compensation medications, in contrast to states such as Texas, which use the average wholesale price (AWP).

A review of two cost-saving examples that referenced specific medications calculated projected savings based on CWCI’s ICIS payment data for prescriptions paid between Jan. 1, 2012 and June 30, 2013.

The first example compared 50mg Tramadol prices from five different suppliers. The highest was $190, followed by $23, $18, $12 and $8 per script. Here, CWCI suggested that the manufacturer of the highest-priced script be removed from the California formulary. From mid 2009 through 2013, however, the unit price for 50mg Tramadol from the supplier of brand name Ultram and at least 10 other suppliers in California was nine cents, so the AWP for a script was $2. So, overpaying for medications is an issue even if the $190 supplier is removed.

The Workers’ Compensation Research Institute (WCRI) also reported that California claims administrators paid a unit price of 35 cents for 5mg Cyclobenzaprine and 70 cents for 10mg while the unit price from Californian suppliers was 10 cents for 10mg and 15 cents for 5mg. Again, the prices suggest that California claims administrators were paying more than the maximum prices.

Based on randomly selected manufacturers and strengths of the top 20 medications identified in the 2013 NCCI prescription drug study, California’s prices were on average 20% lower than the AWP and in some cases as little as 1/24th the cost. California prices were found to be at the lowest retail price range compared with those published on goodrx.com. Pharmacies located in Los Angeles, Miami and Dallas were used for comparison. Findings suggested employers in California workers’ compensation are paying no more than the general public for medications, whereas in Texas employers are paying more by using the AWP.

The second example compared script prices of seven opioid agonists, including Tramadol and Oxymorphone. Oxymorphone was the highest-priced script at $600 and Tramadol the lowest at $60 per script, suggesting a saving of as much as $540 if Tramadol were to be prescribed instead of Oxymorphone.

But prescribing oxymorphone when tramadol could suffice or vice versa could be regarded as an act of gross negligence by the physician. On the World Health Organization (WHO) analgesic ladder, tramadol and codeine are weak opioids regarded as “step two” while acetaminophen and NSAIDs are “step one.” “Step three” opioids include medications such as morphine, oxycodone and oxymorphone, which all differ in their pharmacodynamics and pharmacokinetics, so choosing one or more to treat pain becomes a balance between possible adverse effects and the desired analgesic effect. Oxymorphone (stronger than morphine or oxycodone) is recommended for use only when a person has not responded to or cannot tolerate morphine or other analgesics to control their pain.

A list of opioid medications published by Purdue Pharma was used to identify which opioids were excluded from the Texas formulary. The list of more than 1,000 opioid analgesics was prepared by Purdue to comply with the state of Vermont law 33 V.S.A. section 2005a, requiring pharmaceutical manufacturers to provide physicians with a list of all drugs available in the same therapeutic class. Being in the same class, however, does not necessarily mean they are interchangeable or have the same efficacy or safety.

The list showed available strengths and included (1) immediate and extended release, (2) agonists such as fentanyl, oxycodone, hydrocodone, oxymorphone, tramadol, codeine, hydromorphone, methadone, morphine, tapentadol and levorphanol and (3) combinations such as acetaminophen with codeine, oxycodone with acetaminophen, oxycodone with asprin, oxycodone with ibuprofen, hydrocodone with acetaminophen, hydrocodone with ibuprofen, acetaminophen-caffeine with dihydrocodeine, aspirin-caffeine with dihydrocodeine and tramadol with acetaminophen.

It appears that extended-release medications used for around-the-clock treatment of severe chronic pain have been excluded or are not listed in the Texas formulary, with a few exceptions. For example, 80mg OxyContin (Oxycodone) ER 12 hour (AWP $18, Medi-Cal $15) is excluded. 120mg Hysingla (Hydrocodone) ER 24 hour (AWP $41, Medi-Cal $34) is not listed. However, 200mg MS Contin (Morphine) ER 12 hour (AWP $31, Medi-Cal $26) and 100mcg Fentanyl 72 hour transdermal patch in both brand name and generic forms are approved under the Texas formulary. Immediate-release generic medications such as oxycodone, hydromorphone and hydrocodone with acetaminophen in all strengths are approved, but immediate-release hydrocodone with ibuprofen and oxymorphone in either immediate or extended release are excluded.

Would the objective of AB1124 be achieved by utilizing the Texas formulary? The above review suggests it would not. All the opioid medications available through the Texas formulary have the potential to cause addiction and be abused, possibly leading to death either accidentally or intentionally. As an example, the executive director of the Medical Board of California has filed accusations against Dr. Henri Eugene Montandon for unprofessional conduct including gross negligence. His patient was found dead with three 100mcg fentanyl patches on his upper chest. The autopsy revealed he potentially had toxic levels of fentanyl, codeine and morphine in his bloodstream at time of death. These three opioids are available under the Texas formulary.

An article published on the website www.startribune.com described the challenges in treating returning soldiers from combat duty. The article discusses Zach Williams, decorated with two Purple Hearts who was found dead in his home from a fatal combination of fentanyl and venlafaxine, an antidepressant. Venlafaxine in both immediate- and extended-release form is approved in the Texas formulary. In addition, the following statement was made in a 2011 CWCI study into fentanyl: “Of the schedule II opioids included in the Institute’s study, the most potent is fentanyl, which is 75 to 100 times more powerful than oral morphine.”

The top 20 medications identified by the 2013 NCCI prescription drug study were also compared with the Texas formulary, and six medications were found to be excluded, including three extended-release opioids, OxyContin (Oxycodone), Opana ER (Oxymorphone) and the once-daily Kadian ER (Morphine). The twice-daily, extended-release morphine MS Contin, however, was approved. Flector, a non-steroidal anti-inflammatory transdermal patch used for acute pain from minor strains and sprains, was excluded, as was carisoprodol a muscle relaxant classified by the DEA as a Schedule IV medication (the same as Tramadol). The Lidocaine transdermal patch, which is a local anesthetic available in both brand name and generic. was also excluded. Lidocaine patches have been found to assist in controlling pain associated with carpal tunnel syndrome, lower back pain and sore muscles. Apart from carisoprodol, it would appear the remaining five were excluded from the Texas formulary because of their high price rather than concerns regarding their safety or potential for abuse.

The U.S. Food and Drug Administration (FDA) is responsible for the approval of all medications in the U.S. Its approved list is the U.S. pharmacy formulary (or closed formulary). California workers’ compensation uses this list for treatment and the Medi-Cal formulary for medication pricing. In comparison, Texas workers’ compensation uses its own formulary, which is a restricted list of FDA-approved medications, and pays a higher price for approved medications than California’s system does.

Implementing an evidence-based formulary, such as in Texas, may result in an injured worker’s not having the same choice of medications as a patient being treated for pain under California’s Medicaid healthcare program. How can this be morally justified? Will we see injured workers paying out-of-pocket to receive the medications necessary to control their pain?

Claims administrators can greatly reduce pharmaceutical costs through their own initiatives by (1) ensuring that they pay no more than the Department of Industrial Relations (DIR) published price for a medication, (2) ensuring that physicians within their medical provider network (MPN) treat pain using the established pharmacological frameworks such as the WHO analgesic ladder, (3) ensuring that quantities and medication strengths are monitored, along with how a person has responded to analgesics, (4) ensuring that, when controlling pain with opioids, there is a heightened awareness for potential abuse, misuse and addiction, (5) establishing a multimodal pain management regimen including non-pharmacological therapies such as acupuncture, aerobics, pilates, chiropractic and physical therapy tailored to a person’s medical condition and, (6) for chronic pain, considering introducing an Internet-delivered pain management program based on the principles of cognitive behavioral therapy.

The progress of many of these initiatives can be automatically monitored through a claims administrator’s technology solution, where a yellow or red flag is raised when prices paid exceed the legislated maximum amounts, when a pharmacological step therapy or progressive plan has been breached or when non-pharmacological therapy goals have not been achieved.

Using these initiatives, as opposed to restricting specific manufacturers or medications through a closed formulary, will undoubtedly yield a far better outcome for the injured worker and lower the cost to the employer, benefiting all involved.

10 Tools to Cut Workers’ Comp Costs

1. Implement a fraud-abatement program

Employee education helps defer fraud, so creating a fraud abatement campaign that fits for your industry and includes education of employees can have a significant impact on the number of questionable claims filed. Communicate regularly with your employees about workers’ compensation and eliminate misconceptions by explaining what it is and how it works. Consider using social networks, flyers, posters, employee newsletters and guest speakers to spotlight workers’ compensation fraud as a serious crime. The guest speaker can be a representative from your insurance carrier’s special investigation unit (SIU), a local law enforcement representative who is focused on workers’ comp fraud (such as a Department of Insurance fraud investigator or deputy district attorney handling prosecutions in the fraud unit) or a representative of your contracted SIU partner. Provide employees a mechanism to report fraud anonymously, such as a fraud hotline or email system, so they can easily report suspicions. Encourage employees to share information.  Insurance fraud is a felony in most states, and employers should demonstrate zero tolerance, with timely investigation of claims and reporting of suspicious claims to law enforcement.

2. Use sound hiring practices

The best defense is a strong offense. Conduct thorough pre-employment background checks to eliminate candidates who are unable to perform the job or not a good fit. If you have questions about anything you find in a background investigation, ask the applicant to explain.  It is a good idea to hire an investigative agency to assist, especially if you do business in multiple states, to ensure the investigations abide by all local, state and federal laws and regulations. Consider pre-employment drug testing; drug users can be unsafe workers and are more likely to file false claims to obtain money for drugs.

3. Pave the way for return to work

Communicate to employees that every attempt will be made to get injured employees healthy again and returned to work. Prepare a comprehensive, written, return-to-work plan, with detailed job descriptions that include temporary or alternative duties, and communicate that plan to appropriate persons. The functional job description is one of the best tools for identifying the discrete and unique duties, responsibilities and accountabilities associated with varying positions. The functional job description is a part of a continuing process throughout the entire employment relationship and should track and reflect changes in organization structure, tasks, accountabilities, skills and requirements. The functional job description should document the minimum job requirements and preferred qualifications of each position (including education, experience, licenses, certificates, physical requirements and work day/hours). This description can be used in conjunction with hiring practices to ensure the applicant has the ability to perform the job. Functional descriptions are also important for medical providers to use in determining return to work following an injury, including whether the employee can return to work full duty or in a modified capacity.

4. Surveillance video equipment

Monitoring is a proven spoiler of workplace crimes.  Consider both covert and overt monitoring, depending on the job site, type of claims filed and privacy concerns. If an injury is alleged, quickly secure the video and forward to your investigative partner to secure the evidence, log chain of custody and provide copies as needed. If the video does not match the employee’s description of the injury, create a strategy to share copies of the video with medical providers to ensure that only warranted benefits are obtained. Communicate with your claim professional, defense attorney and investigative partner to determine the best plan of action. For example, additional investigation may be warranted before putting the video into evidence, such as surveillance to document the employee’s current physical abilities or a recorded statement or deposition by the injured worker to memorialize his account of the injury. Your team will create a strategy to appropriately leverage the video in handling the claim and potential fraud.

5. Have a plan for when an industrial injury occurs

Provide training to leadership on how to respond when an industrial injury occurs. Respond immediately to any reported injury or rumor of potential injury. Promptly recommend your predetermined medical provider to the injured employee. A detailed description of the accident and injury should be obtained, and any relevant workplace evidence should be preserved. Have a professional investigation conducted as soon as possible. A timely investigation can help ensure the injured worker receives the appropriate benefits at the appropriate time. A thorough investigation can include statements by the injured worker, witness statements, scene inspection, photographic evidence, the securing of workplace equipment or other evidence. An investigation can also include a search of public records, criminal and civil court records, Department of Motor Vehicle records, a prior claims search, the securing of copies of records such as police report, 9-1-1 call record, OSHA report or other, as applicable. The investigation can identify potential subrogation so that the claim professional and defense attorney can pursue potential third-party liability. The investigation will also highlight suspicions; consequently, having a professional, third-party investigative agency conduct the initial compensability investigation is a critical tool in preventing fraud.

6. Familiarize yourself with investigative tools

Investigation of claims provides many benefits on workers’ comp costs and is especially critical for claims that have “red flags,” to ensure that only warranted benefits are administered and that potential abuse or fraud is identified early. Technological advances have provided new investigative tools as well as enhanced the capabilities of “old-school” investigative solutions. Background investigations, Internet searches, social-network monitoring and database searches are cost-effective investigations that can be conducted quickly and provide a plethora of valuable information. Information found on social networking often includes current activities, past behavior, hobbies, interests, sports, clubs, association, vacations and more. This evidence can include both photographic evidence and written information. If the injured worker is not improving despite medical treatment, consider having surveillance conducted to determine the level of physical abilities, limitations and restrictions. Surveillance evidence provides the best impact. The investigative agency should conduct a pre-surveillance investigation that includes searching social networking sites, databases, public records and DMV records. While currently the use of drones is not legal in most states, this is technology that may be incorporated into the investigative toolbox in the near future. Field investigations are important to determine compensability of a claim, so obtain recorded statements from the injured worker and any potential witnesses. Remember that “witnesses” are not only people who may have seen the injury occur, but people who may have information about the injured worker’s prior injuries, prior claims, hobbies, other employment, activities, etc. This may include co-workers who work near the injured worker, eat lunch together, share a carpool or take breaks together. Question potential witnesses if they personally obtained photographs or video of the subject incident or scene, as this is often the case given the widespread use of smartphones. Medical facility searches and pharmaceutical searches locate prior medical records and pharmaceutical history, which can help determine compensability and apportionment, identify potential drug abuse and ensure that only warranted benefits are paid.

7. Implement a safety program

Make workplace safety a priority; a safe workplace makes fake or exaggerated injuries harder to legitimize. Hold regular safety meetings and remind employees about workplace safety through social media, posters, flyers or employee newsletters. Consider a program that rewards workers for meeting safety milestones. Encourage employees to identify potential safety issues and share their ideas. To reduce repetitive injury claims, provide onsite ergonomics solutions to ensure employees are performing their duties the correct way. Encourage prompt reporting of injuries to immediately identify and resolve any problem that may contribute to workplace injuries.

8. Create an Experienced and Specialized Team

Build a strong and dedicated team to manage your workers’ compensation claims. Your team should include experienced claim management professionals, specialized legal resources, risk managers, a licensed investigative agency specialized in workers’ compensation and an SIU with certified fraud specialists (either internal with your insurance carrier or contracted directly). Communicate with your claim professional and ensure that he is actively identifying red flags and investigating your claims in a timely fashion. Partner with a licensed investigative agency that is experienced in your industry. If insured with a carrier, communicate with the carrier’s SIU to ensure that your claims are being reviewed by fraud specialists. If you are self-insured or in a high-deductible program, partner with an investigative company that has a successful SIU. Communicate with your team regularly to ensure active handling of claims, identify suspicious claims early and build effective strategies to leverage investigative evidence to stop unwarranted benefits and fight fraud.

9. Listen

Listening to employees can provide valuable information. The injured worker may have provided key information before and after the injury. Was the employee complaining before the alleged injury about work, physical pain or personal problems? Was he disgruntled, turned down for a promotion or had a change in job duties, supervisor or responsibilities? Did the injured worker talk about family problems such as health issues, additional family responsibilities or other personal situations? This information may be relevant and should be shared with the claim team. Listen after a workplace injury and throughout the claims process, as rumors of misrepresentations or foul play may filter through the workplace. Keeping an ear to the grapevine may help in weighing a claim’s validity. Have an “open-door” policy and encourage employees to share information and report suspicions.

10. Be Familiar With the Red Flags of Workers’ Comp Fraud

  • Injury reported late or on a Monday or following time off
  • Exaggerated details about incident or symptoms
  • Co-worker skepticism or different versions of the incident
  • Disgruntled, soon-to-retire, soon-to-strike, facing layoff or involved in seasonal work that is about to end
  • Unexplained or excessive time off prior to claimed injury
  • Has a history of short-term employment
  • New on the job, and injury is unwitnessed or suspicious
  • Experiencing financial difficulties or domestic problems before filing the claim
  • Recently purchased a private disability policy
  • Submitted employment application with misrepresentation(s)
  • First notification of injury or claim made after employee is terminated or laid off
  • Reported immediately after days off or alleged injury around date of a denied vacation request
  • History of substance abuse, prior injuries or prior accidents, especially soft-tissue injuries
  • Is known to participate in high-risk activity such as snowboarding, drag racing or boxing
  • Suspicion or tip of unreported work, cash work, seeking other employment or self-employed
  • Failed to report the injury in a timely manner or “forgot” to report critical details
  • History of reporting injuries, especially soft-tissue injuries
  • Other family members also receiving workers’ comp benefits or other “social insurance” benefits
  • Is unusually familiar with workers’ comp claim handling procedures and laws
  • Is consistently uncooperative, refuses to sign documents or submits documents with cross-outs
  • Information that employee is active or may be exaggerating limitations
  • In-house surveillance, tip or information indicating the injury may be non-industrial or not legitimate
  • Refuses to provide a statement or sign a medical release
  • Moves out of state or country shortly after filing claim
  • Protests about returning to work or changes provider once released to work
  • Details of accident are vague or contradictory, have inconsistencies or are not credible
  • Reported injury has same factors of other claims reported by co-workers, especially in the same time period
  • Denial or failure to report prior injury or medical treatment
  • Suspected altering of checks, off-work slips, prescriptions, or suspicious mileage reimbursement
  • Dramatizes physical condition or draws attention to collar, brace or other supportive devices
  • Is observed moving normally or without medical devices (collar, brace, cane, etc.)

‘Un-Healthcare’ Work Deserves Focus

Some, like me, who have dedicated their lives to the maintenance and improvement of physical and mental health, may not consider themselves traditional, clinical “healthcare workers.” We may feel as if we work on the fringe, on the outside. We are not nurses or physicians. We work in public health, wellness, nutrition, occupational safety, health economics, fitness, risk management, pharmacy, laboratory, research, insurance and other similar non-traditional clinical professions. We may feel we make a lesser impact on patient care and overall community wellness and vitality. Given historical reference, however, this is absolutely untrue.

The term “healthcare” (whether one word or two) has not been used at all in books, papers, references or published text over hundreds of years, until the mid-1980s. But since the late 1700s, those of us “living on the fringes” have been healthcare workers in the true sense of the practice.

We may not provide bedside patient care in a healthcare or hospital setting, but we do:

  • Prevent infectious disease by promoting the use of vaccines;
  • Protect the public from pathogenic organisms through water and food sanitation;
  • Prevent addiction and antibiotic resistance through pharmaceutical stewardship;
  • Manage repercussions from post-traumatic stress with mental health interventions;
  • Research global disease trends to stop them in their tracks;
  • Manage risk by improving safety, security and improving quality;
  • Decrease work-related injury and illness by creating safe workplaces, and
  • Prevent heart disease and weight-related cancers by promoting regular exercise.

Those efforts ensure that a population’s health (both physical and mental) does not suffer, that it is either maintained or, better yet, improved. We are the “Un-Healthcare Workers.”

It is especially important that traditional healthcare organizations and healthcare workers know this now. As healthcare systems around the world are caring for patients with emerging infectious diseases like Ebola and re-emerging vaccine-preventable diseases like measles, they need to consider that we un-healthcare workers have responsibility for protecting our communities. If we can prevent diseases from becoming epidemic in our communities, healthcare providers working in healthcare settings like hospitals can focus more on providing needed care to those with emergent injuries and chronic disease.

The American Public Health Association (APHA), which has represented people protecting the public since 1872, announced a policy in November on preventing Ebola and “globally emerging infectious disease threats” that marked a significant change in the recognition of the “un-healthcare worker.” The APHA identified the need to focus efforts on preventing infectious disease in the community and workplaces as a means to protect healthcare systems from exposure to diseases that may change the overall landscape of inpatient care. In the process, the APHA advocates for the role that we “un-healthcare workers” have in maintaining and improving the physical and mental health of our population so that healthcare workers can focus on medical interventions for those who really need it.

Sound, science-based public policy and fiscally grounded public health funding can do what it did for the hundreds of years prior to the mid-1980s; it can protect our communities from disease, so that we can protect the vitality of our healthcare systems.