Tag Archives: workers

A Growing Challenge: Managing Talent

Recruitment and retention of sufficient workers presents a growing challenge for many U.S. businesses in manufacturing, construction and many other segments of the economy.

Competition for workers continues to grow as the improving economy drives down unemployment and applies pressure on employers to increase wages.

U.S. Bureau of Labor Statistics November employment statistics, for instance, showed employment continued to trend up in professional and business services, manufacturing and healthcare.

While most businesses welcome the uptick in business opportunities, the pressure to increase wages threatens the ability of many of these businesses to take full advantage of these new opportunities. While welcoming the strengthened manufacturing economic performance, the National Association of Manufacturers says manufacturers continue to say that the inability to attract and retain a quality workforce is one of their top concerns. Employers in the healthcare and services industry increasingly are reporting similar challenges.

With tightening immigration standards making it more difficult to close gaps with foreign labor, savvy businesses are taking the initiative to respond to this changing labor environment by reevaluating their recruitment, retention and compensation practices. In addition to looking to recruit new workers from the ranks of the under- and unemployed, many businesses increasingly are looking to recruit employed workers from other employers by offering sweeter compensation, work-life balance, promotion or other sweetened employment opportunities. Businesses competing for the same workers will want to review their existing employment and compensation packages to help promote their ability to recruit workers and to retain existing workers.

See also: What Is the Business of Workers’ Comp?  

In recognition that other businesses may target their best workers, businesses should shore up their compensation and retention practices and strengthen their noncompetition, trade-secret and other critical workplace protections to guard against disruptions from loss of key personnel. When conducting these activities, businesses should not rely on past legal experience. Federal and state law has evolved significantly regarding noncompetition, trade secret and other business intelligence safeguards. Businesses that have not done so in the past year should consider engaging experience counsel to review their existing policies and practices for possible witnesses and opportunities for enhanced strength.

Businesses also may want to discuss opportunities for bonus or other golden handcuffs compensation packages to give key workers incentives to stay with the organization. Employers also should recognize that departing employees may take advantage of opportunities to air resentments.

In the face of these risks, employers will want to ensure that their existing wage and hour, harassment, safety and other workforce policies and practices are currently compliant as well as be prepared to respond to any allegations of past misconduct. Employers should carefully conduct exit interviews and investigate any alleged misconduct or other negative feedback to mitigate potential risks and liabilities. Employers also should consult with experienced employment and employee benefits counsel about appropriate design, administration and documentation of these policies, practices,i arrangements and activities.

The Paradox on Drugs in Workers’ Comp

Pharmaceuticals remain a large component of both total claims and medical costs in treating workers’ compensation injuries and illnesses. On the plus side, pharmaceuticals lower medical costs by decreasing demand on other health resources, improve health outcomes, including treatment safety, and provide earlier opportunities to return to work. On the negative side, prices can be very high.

States have been trying to address that negative through numerous efforts for many years, yet costs keep climbing. A study finds that a solution exists, if claims administrators become aware at the most granular level about the sources of medications and the prices that suppliers charge.

Background

Pharmaceutical pricing in the U.S. is unregulated. Pharmaceuticals are manufactured through two sources, (1) the originator (i.e. the inventor) of the medication and (2) the generic manufacturer. The originator markets the medication through a brand or trademark name and has sole marketing rights for a period. This period varies from country to country, but the norm is from five to 10 years. On expiration, generic pharmaceutical manufacturers are allowed to produce the medication and introduce price competition into the market. Pharmaceutical Research and Manufacturers of America (PhRMA) reports that generic medications account for 80% of dispensed medications in the U.S.

In an effort to control pharmaceutical pricing in California workers’ compensation, a number of legislative changes were introduced.

2002 – Claims administrators could use pharmacy benefit managers (PBMs) and pharmacy benefit networks (PBNs) to establish contract prices below the maximum price established by the legislature and to scrutinize prescribed medications at the time of dispensing. A reduction in pharmaceutical costs was expected, yet a report prepared by the California Workers’ Compensation Institute (CWCI) in October 2014, titled “Report to the Industry: Are Formularies a Viable Solution for Controlling Prescription Drug Utilization and Cost in California Workers’ Compensation?” showed the average pharmacy cost for the first year of treatment for an indemnity claim increased from $390 in 2002 to $430 in 2003 (an increase of more than 10%).

2004 – The pharmacy formulary (i.e. list of medications) established by California’s Medicaid welfare program, called “Medi-Cal,” was introduced into workers’ compensation. The formulary and price schedule are based on the state’s negotiated price with suppliers. By contrast, most other workers’ compensation jurisdictions use schedules based on the supplier’s average wholesale price (AWP), with a plus or minus percentage adjustment to establish the maximum price (e.g., AWP + 10% or AWP – 5%). Both the Medi-Cal price and the AWP are established before any off-invoice discounts, rebates or other incentives are applied by the pharmaceutical supplier. Price differences between Medi-Cal and the AWP can vary significantly. For example, paying the lowest Medi-Cal price of 4 cents per unit for the generic medication Meloxicam 7.5mg tablet, instead of paying the AWP, provides a saving of as much as 98%. Once again, expectations for a significant reduction in pharmaceutical costs were anticipated, but, according to the CWCI, the cost only dropped from $321 in 2004 to $282 in 2005 (a reduction of 12%), before increasing to $352 in 2006 (an increase of almost 25%).

2005 – In an effort to control total medical costs, claims administrators in California were allowed to establish their own medical provider networks (MPN). The intent of this legislation was to curtail the adversarial relationship between the medical profession and claims administrators and also provide an opportunity for establishing contract rates with physicians, below the mandated maximum prices, for both services rendered and medications dispensed. This time, the expectation was to see a reduction in costs for both medical treatments and medications dispensed by a physician. Instead, the CWCI showed an increase from $282 in 2005 to $352 in 2006 (almost 25%) and then to $412 in 2007 (a further increase of 17%).

2007 – Legislation was enacted to require that the maximum price paid for a supplier’s medication that was not listed in the Medi-Cal formulary be equivalent to similar medications listed in the Medi-Cal formulary; the prior practice was to use the supplier’s AWP to calculate the price.

The Medi-Cal formulary includes a number of suppliers providing the same medication. PBMs, PBNs and physicians dispensing medications also have formularies that may have different suppliers to Medi-Cal, especially where a large number of suppliers are involved. For example, Gabapentin is available from more than 55 suppliers, which may include the originator, the generic manufacturers and companies that repackage others’ medications in various package sizes. Hydrocodone-Acetaminophen is available from at least 45 suppliers in different strengths and package sizes.

Again, the legislation was expected to lead to a significant decrease in costs, because a number of physicians were dispensing medications from suppliers that were not listed in the Medi-Cal formulary. The cost, however, increased by almost 7%, from $412 in 2007 to $440 in 2008. This percentage increase is baffling. The National Council on Compensation Insurance (NCCI), in its September 2013 report titled “Workers’ Compensation Drug Study: 2013 Update,” ranked Meloxicam as the highest physician-dispensed medication by dollars paid. By applying the Medi-Cal price, instead of the AWP, cost savings should have been as high as 98%. The savings for Tramadol HCL, the second highest ranked physician dispensed medication by dollars paid, were 89% based on the Medi-Cal price of 9 cents per unit.

So, legislation enacted in California from 2002 through 2007 provided all the means to control and curtail pharmaceutical costs. Yet, according to the CWCI, the average first year pharmaceutical cost per indemnity claim reached $953 in 2012 from $390 in 2002 (an increase of 144%).

The Study — Huge Range in Prices

This paradox initiated an independent study into pricing based on the medications listed in the NCCI report. The study identified that prices offered by manufacturers of generic medications varied significantly, and that a lack of awareness by claims administrators could be a leading factor in the high cost of pharmaceuticals in workers’ compensation. The study excluded repackagers’ prices, which are often associated with physician-dispensing. The report published from this study listed the following medications:

  • Meloxicam 7.5mg tablet — prices ranged from four cents through to $5.73.
  • Gabapentin 300mg capsule — six cents through to $1.75.
  • Lidocaine 5% transdermal patch (30 patches) — $102.98 through to $258.97.
  • Hydrocodone-Acetaminophen (“APAP”) — from 22 cents through to $2.69 per unit, depending on the strength. The price for Acetaminophen with Codeine ranged from 15 cents through to 90 cents per unit.
  • Omeprazole 20mg — from 29 cents through to 65 cents.
  • Cyclobenzaprine HCL 10mg tablet — from four cents through to $1.13.
  • Oxycodone HCL — from 23 cents through to $1.57 depending on strength.
  • OxyContin — a brand name extended release or long acting Oxycodone HCL, only manufactured by Purdue Pharma and currently under a protection period, ranged from $2.27 through to $14.51 per unit based on strength.

The Solution

For claims administrators to influence a downward trend in pharmaceutical costs associated with pricing, consideration should be given to the following initiatives:

  1. Know the suppliers of the medications in the PBM/PBN’s formulary.
  2. Compare the suppliers of the PBM/PBN’s formulary to the Medi-Cal formulary to ensure at least the lower prices available from Medi-Cal suppliers are being paid.
  3. Pay only the “no substitute allowed” price when a prescribed medication is not included in the PBM/PBN’s formulary.
  4. When an MPN’s physician dispenses medications, ensure that (a) the “no substitute allowed” price is not paid and (b) the lowest available price is paid for a medication from a supplier listed in the Medi-Cal formulary, unless a lower contracted rate is already in place within the MPN.
  5. Analyze the paid price for pharmaceuticals on at least a monthly basis to ensure the lowest price for a medication has been paid regardless of supplier and monitor medications most frequently dispensed along with their quantities to ensure PBMs/PBNs and physicians are dispensing the lowest cost medication identified in the Medi-Cal formulary, unless a lower contracted rate is already in place.

A claims administrator’s processes and technologies to manage the pharmacy vendor relationships, pre-authorizations and bill reviews must be seamlessly integrated and be able to capture data at the most granular level, which in the case of pharmaceuticals in the U.S. is the National Drug Code (NDC). Without this detailed integration, pharmaceutical costs associated with pricing will continue to increase, as illustrated in California, regardless of legislation changes enacted in the future.

The report relating to this study is available in PDF format from the website managingdisability.com under the Dialogue tab.

Oregon Study Shows Which States Are Next

The biennial study on workers’ compensation premium rates issued by the Oregon Department of Consumer and Business Services (DCBS) was released last week, and, as always, is worthy of a review by those of us entrenched within the industry. The study ranks all 50 states and Washington, D.C., based on rates that were in effect Jan. 1, 2014. This year’s results show that major reforms don’t always gain the results that were intended or marketed to the industry; and while the results may not accurately reflect legislative intentions of the past, the report may be a better predictor of major reforms to come.

The study shows that, despite extensive reforms designed to lower costs, California now has the most expensive rates in the nation, followed by Connecticut. North Dakota had the least expensive rates. In the Northwest, Idaho’s rates were the 14th most expensive, followed by Washington. Oregon researchers also compared each state’s rates to the national median (midpoint) rate of $1.85 per $100 of payroll — California, for instance, was almost twice the median

According to Mike Manley, one of the co-authors of the survey, “We continue to see a trend in the distribution of state index rates in our study clustering in the middle of the distribution. A record 21 states are within plus or minus 10% of the 2014 study median. This makes the rank values more volatile from one study to the next. I would recommend that states look also to their ‘Percent of study median’ figure for comparisons over time.”

Because states have various mixes of industries, the study calculates rates for each state using a standard mix of the 50 industries with the highest workers’ compensation claims costs in Oregon. Details about how the study was conducted can be found here. A summary of the study was posted Wednesday, Oct. 8; the full report will be published later this year.

The summary report, available here, provides the complete ranking of the states premium rates. I have taken that data and added a comparative column that shows at a glance how far up or down the scale a state has moved since the last report in 2012. The table presents an interesting view, particularly juxtaposed with the knowledge of what states have undergone significant reforms in the past few years.

table1bob

We can see that there were major drops in premium rank for both Kentucky and Wisconsin. Kentucky moved from 22nd-highest in the nation to 40th, improving by 18 positions. Wisconsin moved down 11 spots, from 12th-highest to 23rd. While Wisconsin did enact some changes in 2012, neither state is considered to have been a major reform state over the last few years.

For a couple of those states undergoing dramatic reforms, Oklahoma and Tennessee, it is too early to tell the effect, as they are just implementing changes this year. Others, however, including California and Kansas, saw premium costs as a comparative rise despite reforms intended to do otherwise. Illinois, another reform state, did see some positive movement, but it is probably not statistically significant given the weight of the costs and issues in that state.

I would postulate based on this report that people in New Mexico, Hawaii, Missouri and Delaware may be thinking of what changes should be in order, because they had dramatic negative movement on the scale this year. Even if past reforms overall are not creating significant improvement in these numbers, I am pretty sure they will be a better predictor of what states may be facing reform in the future.

Oregon has conducted these studies in even-numbered years since 1986, when Oregon’s rates were among the highest in the nation. The department reports the results to the Oregon legislature as a performance measure. Oregon’s relatively low rate today reflects the state’s workers’ compensation system reforms and its improvements in workplace safety and health.

Here are some key links for the study/workers’ compensation costs:
• To read a summary of the study, go here.
• Prior years’ summaries and full reports with details of study methods can be found here.
• Information on workers’ compensation costs in Oregon, including a map with these state rate rankings, is here.

How to Optimize Nurse Case Management in Workers' Comp

Traditionally, in workers’ comp, nurse case management (NCM) services have been widely espoused yet misunderstood and underutilized. The reasons for underutilization are many. Tension between NCM and claims adjusters is one. Even though overburdened, adjusters often overlook the opportunity to refer to NCM.

Also to blame is the NCM process itself. In spite of professional certification for NCM, the process is poorly defined for those outside the nursing profession. More importantly, NCM has difficulty measuring and reporting proof of value.

Underlying issues

Continuing to do business as usual is not acceptable. NCM needs to address several issues to qualify as legitimate contributors. First, NCM needs to articulate its value. To do that, NCM must computerize and standardize its process and measure and report outcomes, just like any other business in today’s world.

Too often, computerization for NCM is relegated to adding nurses’ notes to the claim system. However, such notes cannot be analyzed to measure outcomes based on specific nursing initiatives. 

In most situations, an individual NCM interprets an issue, decides on an action and delivers the response. The organization’s medical management is thereby a subjective interpretation rather than a definable, quantifiable product. 

Granted, the NCM is a trained professional. But when the product is unstructured, variables in delivery cannot be measured or appreciated. A process that is different every time can never be adequately defined.

It's crucial to establish organizational standards about what conditions in claims require referral to NCM—without exception. This will remove the myriad decisions made or not made by claims adjusters to involve the NCM. The referral can be automated through electronic claims monitoring and notification. NCM takes action on the issue according to organizational protocol, and the claims adjustor is notified.

Measure

When the conditions in claims that lead to intervention by NCM are computerized and standardized, the effects can be measured. Apples can legitimately be compared with apples, not to oranges and tennis balls. Similar conditions in claims are noted and approached the same way every time, so the results can be validly measured.

Results in claims such as indemnity costs, time from DOI to claim closure or overall claim cost can be compared before and after NCM standardization. Comparisons can be made across different date ranges for similar injuries going forward to measure continued effectiveness and hone the process.

Measuring outcomes is the most essential aspect of the process. Value is disregarded unless it is defined, measured and reported.

For non-NCMs, the dots in medical management must be connected to see the picture. Describe what was done, why it was done and how it was done the same way for similar situations and in context with the organization's standards. Then report the outcome value. Establish a continuing value communication process.

NCM constituencies should be informed in advance of the process and outcome measurements. Define in advance how problems and issues are identified and handled and how results will be measured. Then proceed consistently.

Recognized NCM value

Even as things now stand, NCM's value is being recognized. American Airlines recently reported it is adding NCM to their staff and will refer all lost time claims. The company cited a pilot project where nurse interventions were documented and measured, proving their value in getting injured workers back to work. 

Christopher Flatt, workers’ compensation Center of Excellence leader for Marsh Inc., wrote in WorkCompWire (http://www.workcompwire.com/), “One option that employers should consider as part of an integrated approach to controlling workers’ compensation costs is formalized nurse case management. Taking actions to drive down medical expenses is an essential component to controlling workers’ compensation costs.”1

Industry research and corporate or professional wisdom regarding risky situations can supply the standardized indicators for referral to NCM. American Airlines uses the standard that all lost time claims should be referred to NCM. But there are many, sometimes more subtle, indicators of risk and cost in claims that can be identified early through computerized monitoring and referred for NCM intervention.

Another example of developing standard indicators for referral is based on industry research that shows certain comorbidities, such as diabetes, can increase claim duration and cost. These claims should also be referred to NCM. Yet another example is steering away from inappropriate medical providers who can profoundly increase costs. 

As a long-ago nurse and a longer-time medical systems designer and developer, I believe the solution lies in appropriate computerized system design. The elements need to be simple to implement, easy to use and consistently applied. Only then can NCM offer proof of value.

1 Christopher Flatt: The Case for Formalized Nurse Case Management