I don't understand why those who believe health reform is socialism don't have faith in the free market's ability to control costs and deliver quality.

Here's why I'm confused.

Several large health insurers have decided its time to get serious about managing costs; they're introducing plans with limited provider networks and either no coverage for out of network providers or high deductibles and co-insurance/copays.

The plans, introduced by United Healthcare, Aetna, Wellpoint and others, are currently only available in a few markets as the healthplans test market receptivity.

Kudos to these insurers for finally getting serious about managing cost. While they are concerned about the potential for a repeat of the consumer backlash seen in the nineties, I'm betting the consumer backlash will be minimal.

The political backlash is a whole different story; more on that in a minute.

Most employees are all too aware of the rising cost of benefits; they have seen their premium contributions increase dramatically as the benefits plan has slimmed down. While some aren't going to be happy if they have to pay more to see their favorite doc or go to the nearest hospital, their anger will be tempered by the knowledge that they are better off than many of their neighbors who have no insurance at all.

That wasn't the case in the early nineties. Since 1993, the number of people without insurance has increased almost 20% to 52 million from 43.9 million.

Just as the benefits landscape has changed, so has the political. We're already starting to hear some politicians complain that employers' changes are evidence that 'ObamaCare' isn't working as advertised, that the President's promise that reform would allow you to keep your current plan wasn't true.

These critics probably know their argument is specious at best. The reform legislation was specifically designed to allow employers to maintain control over their plans, the thinking being the free market will develop solutions to the cost and coverage problem.

And that's precisely what is beginning to happen, albeit slowly and in baby steps. Health plans have realized that risk selection isn't the path to success, quality and cost of care and more effective member health management is.

There's a bit of hypocrisy, or perhaps more kindly, ignorance among those who criticized 'Obamacare' for its 'socialist' leanings and now fault reform for benefit plan changes implemented by employers seeking market answers to rising costs.

The cost control steps included in the reform legislation are weak, scarce, and small; stronger cost controls were discarded in order to get the bill past lobbyists and their friends in the Senate (and to a lesser extent, the House). As a result, we're left with a bill that - de facto - relies on private insurers and employers to develop tools and methods to control cost.

Critics can't have it both ways. Either decry the bill for its weak cost controls and governmental 'takeover' of health care, or slam it for forcing employers to change plans to control costs because the bill doesn't do enough.

Trying to both results in one argument refuting the other.

Posted by at 8:17 AM | Permalink | Comments (0)

There's a good bit of activity on the regulatory front as states with work comp pharmacy fee schedules consider possible changes to address the myriad issues inherent in AWP.

A little background will help frame the issue.

First, it's important to understand the fee schedule amount is only paid if the script doesn't go thru a PBM, and the vast majority of scripts do go thru a PBM, ensuring the carrier/employer/fund pays substantially less than the fee schedule.

My firm's survey of large payers indicates network penetration was 82% in 2008. Therefore, fewer than one in five scripts are paid at fee schedule.

Some think setting a fee schedule at Medicaid solves the problem neatly. Were it only that simple.

Let's look at California, which is the only state using Medicaid (known as Medi-Cal in CA). In point of fact, drug costs per claim are up 72% despite a fee schedule reduction that cut price more than 25%. Clearly, the lower fee schedule did NOT control cost.

I believe what has suffered is the clinical management of drugs; as evidenced by CWCI's recent report narcotic opioid usage is up 600% over the last few years. In addition, cost per claim is up dramatically - driven primarily by utilization.

Medicaid could be used as the basis for a reimbursement calculation, however Medicaid has several inherent problems.

First, it is a political football, subject to the political winds. This has caused significant problems in New York already, and has led regulators in California to prevent implementation of the lower MediCal reimbursement rates for work comp. As state budgets become increasingly constrained and as Medicaid greatly expands, we will undoubtedly see more states seek to reduce program costs by price reductions - simple, politically palatable, and score-able.

Second, Medicaid doesn't cover a some drugs used in comp, especially pain meds and drugs that are not on individual states' Medicaid formularies. As states seek cost reductions beyond those available from simple across-the-board fee cuts, they will move to tighter formularies covering far fewer medications, reference pricing, and other mechanisms that will effectively limit the drugs on the 'fee schedule'.

As a result, a Medicaid-based fee schedule would be the subject of ongoing lobbying activity and legislative/regulatory action as it requires constant 'maintenance'; legislators change reimbursement, drugs came on and off formulary, prices go up and down.

In terms of alternatives, WAC, AWP, and some of the other methodologies are inherently flawed. However there are other standards - standards such as Federal Supply Schedule, Average Manufacturers' Price that are not subject to the same flawed processes as AWP. Examining these may help stakeholders assess their usefulness as an alternative.

(for a synopsis of the various pricing metrics, click here.

What does this mean for you?

1. Fee schedules for drugs are not applicable to most drugs paid under workers comp as PBM rates apply.

2.States will move away from AWP; it will be important to understand the alternatives, their pros and cons.

Posted by at 10:07 AM | Permalink | Comments (1)

There's a bit of confusion in the comp pharmacy management space, as there appears to be contradictory evidence from two respected sources about the use of narcotic opioids in workers comp.

First, everyone agrees there's just far too many claimaints getting far too many far too potent narcotics. Perhaps not in those exact terms, but close enough. Heavy duty, potent, potentially addictive, divertable, high-street-value drugs are dispensed far too often in comp.

But there is a bit of disagreement about exactly what's going on.

First, CWCI, the always-authoritative California Workers Comp Institute, has been researching and reporting on this problem for several years, and their data shows the use of narcotic opioids is increasing. Dramatically.

In contrast, one of the largest work comp PBMs, PMSI, recently published their results which indicate a decline in usage of this type of drug early on in the claim cycle. I asked Maria Sciame, PharmD, PMSI's Director of Clinical Services what she thought might account for the decrease in the use of opioid analgesics in the acute phase of injury.

Here's her take (and I quote):

1. increased physician awareness of the potential negative effects of opioids

2. additional organized opioid monitoring strategies (mandatory reporting) associated with opioids may have reduced "off the cuff" opioid prescribing

3. increased awareness of pain management guidelines that call for non-opioids for the initial treatment of mild to moderate pain

4. decreased prescriber fear regarding the use of non-steroidal anti-inflammatory agents over the past year...remember the FDA warnings that have been issued within the past few years regarding the negative cardiovascular affects associated with NSAID use...started with Vioxx...physicians are becoming less cautious and have regained their comfort level with the use of NSAIDs again; thus, replacing narcotics for acute injuries with NSAIDS.

There are a couple other factors worth considering.

a) PMSI's business all flows thru a PBM, whereas CWCI's script data is from payers that use PBMs and some that don't (even in this day and age, some payers don't use PBMs; go figure). PBMs have clinical management programs in place to address things like early usage of narcotics.

b) CWCI's data isn't specific to early usage, whereas PMSI's is (in this instance)

c) CWCI is specific to California; PMSI's is national and as NCCI has reported, there are dramatic differences in prescribing patterns across states. NCCI's research also indicates narcotic usage across the country has stabilized somewhat of late after several years of consistent increases.

So, what does this mean for you?

If you aren't using a PBM, get with the program. If you are, find out if they are actively, assertively, and effectively managing narcotic opioid scripts and claimants on those scripts. If they aren't, find out why not (hint, it may be because you're not able to provide data or support their efforts, if that's not it, they've got some explaining to do)

Ask for data on narcotic usage for claims less than a year old, and older ones as well, and decide if your results are acceptable.

Posted by at 2:00 PM | Permalink | Comments (0)

The work comp pharmacy benefit management industry is growing increasingly sophisticated, and the release of PMSI's Annual Drug Trends Report this morning adds to the trend.

Many of the larger work comp PBMs produce similar reports, providing deep insights into cost drivers, the effectiveness of solutions, and trends that anyone with any responsibility for med loss would be well advised to read.

Here are the quick takes from my admittedly not in-depth read of PMSI's effort.

1. Price was up significantly last year, climbing 4.7%. This is heavily influenced by the price increases pushed thru by big pharma on brand drugs last year in anticipation of health reform.

2. Utilization was up only slightly, driven by more days supply per script.

3. Mail order utilization was up 3.6%, which undoubtedly contributed to the higher utilization as mail order scripts tend to include more days' supply than those dispensed by retail stores.

4. The average number of scripts per injured worker was 11.1 in 2009. Yep, eleven point one. That's a lot of drugs.

5. The report includes an interesting chart graphically illustrating the impact of the age of the claim on scripts per claimant; claims a year old typically had around three scripts at an average price per script of thirty bucks or so; in contrast ten year old claims had 23 scripts averaging over $180 each.

6. Generic efficiency (the percentage of scripts that could have been filled with a generic version) remained at 92%. This is driven by several factors, including state regulations (some have mandatory generic language and others are considering adopting it), PBM and payer intervention and outreach, and the 'macro' pharmacy market's introduction of new brands. Generic efficiency and 'conversion' is key to cost management; according to PMSI (and consistent with other reports) each one point increase in generic utilization reduces cost by 1.4%.

7. Pharmacy in comp remains primarily, and I'd argue overwhelmingly, driven by pain. PMSI's data suggests over three-quarters of drug spend was for pain management - one of the key differences between work comp pharmacy and group/Medicare pharmacy.

8. Our old nemesis OxyContin again accounted for a lot of comp dollars, with 9.9% of spend allocated to the brand and generic versions. On the good news side, Actiq and Fentora usage declined significantly (type 'actiq' into the 'search this site' text box above and to the right for plenty of reasons why this is a very good thing).

9. Finally, the average days supply of narcotic analgesicvs was up 6.4% while the number of claimants getting those drugs actually declined. This may be due to those claimants who could use alternative meds getting off narcotics (or not starting on them in the first place). As a result, the claimants still taking these drugs are more likely to need more meds.

There's a lot more meat in the report, lots of detail on which drugs are driving how much utilization, changes in utilization by class of drug, and most importantly, the impact of clinical programs on utilization and drug mix.

What does this mean to you?

Two things.

While PMSI is one of the largest PBMs, remember that these data refer to their customers' experience and therefore may not be exactly equivalent to your book of business. That said, don't use that as an excuse if your stats aren't up to snuff - instead look for ways to get better.

As you pack for that summer vacation, grab a copy of your PBM's report (go to their site and find it there, or call your rep and have them send it over) and perhaps a couple others.

You know you want to, and you can always hide it inside a Cosmo or Men's Health to prevent mocking stares from the knuckleheads on the next beach towel.

Posted by at 8:08 AM | Permalink | Comments (0)

Getting employees to change unhealthy habits, exercise, eat right, and do all the other little things that make for better health and lower health care costs is fiendishly difficult. As a nation, we've proven that if anything, trying to change behavior is a losing proposition.

But every now and then there's a glimmer of hope, with evidence that some change is possible - and sustainable.

Earlier this week the Orlando Sentinel had a front page article about one company's very successful campaign to help its workers shed some pounds. The company, Total Medical Solutions (HSA consulting client, altho I take no credit for this success), started a team-based weight loss program that has resulted in the disappearance of hundreds of pounds, bonded workers from different parts of the company together around a common goal, and led to some significant business for area clothing stores.

While the benefits for workers are apparent - better health, greater self-esteem, more energy - there are also long term benefits for TMS in the form of (hopefully) lower medical expense for costs associated with obesity. Diseases including hypertension and diabetes are strongly associated with obesity; returning to a healthy weight can dramatically reduce the chance someone will contract these conditions.

There's another benefit - TMS grouped their workers together in teams, teams that crossed department and positional lines. Execs from one department found themselves allied with line workers from another area; accountants with call center staff, operations with marketing (now there's an idea...) - all working together to lose weight.

I've got to believe that this sharing of a common goal will have other benefits, in the form of renewed commitment to corporate objectives, a better ability to work together, and a stronger sense of team.

Kudos to the folks at TMS for finding a creative way to help their staff get healthier.

Posted by at 11:47 AM | Permalink | Comments (0)

In the work comp world there's an oft-used term used to describe medical costs - 'severity'.

I'm beginning to think that word itself is a problem, and perhaps is part of the reason the work comp payer community has proven itself, with few exceptions, unable to effectively manage medical expense.

There are any number of meanings for the term itself, but as it is used in the claim world 'severity' refers to the medical cost of a claim, or when used more broadly, medical costs overall (e.g. Severity of lost time claims increased in 2008 by xx%).

Severity is something that sort of just happens - a claim is either really severe or it isn't. Severity is driven by uncontrollable factors and thus we can only deal with the fallout, or results, or impact of severity.

Severity happens.

It does, but only if we let severity 'happen'. In reality, medical costs are much more controllable than many think; severity doesn't have to happen to you, unless you passively allow it to. But because we've grown accustomed to hearing things like "claims costs increased driven by a 9% increase in medical severity", we think 'oh well, there's that severity again, yawn..."

What we should be doing is asking a lot more 'why' and 'how' questions, and using the answers, or lack thereof, as the basis for actions to control severity:

- why is severity increasing?

- what specific areas and types of medical expenses are up?

- is there a region or state that appears to be up more than others?

- what are we not doing and why are our present programs not controlling cost?

- how do our results compare to our competitors? why? what are they doing differently?

Because the fact is, 'severity' is controllable - if you're willing to ask the hard questions and address some perhaps uncomfortable answers; able to concede that your programs aren't really 'best in class', and willing to adjust, retool, and revamp processes to drive better results.

In my experience most comp payers aren't willing to do what it takes to control severity. And that's why 'severity' controls them.

Posted by at 4:38 PM | Permalink | Comments (5)

Today's WorkCompCentral edition [sub req] reported on an emergency revision to Illinois' state workers comp fee schedule that will change the methodology for repricing surgical implant devices.

The move is a response to what the Illinois Workers Comp Commission described as 'price gouging'. In the announcement, [opens pdf] the state noted "some providers have inflated their reported charges for implants so high that the final reimbursement is as much as 33% over the average cost from other providers.

The previous rate was set at 65% of billed charges; the new reg sets reimbursement at 25% over manufacturer's net invoice price. The rationale for this? The "reimbursement rate is reasonable. It provides a significant profit margin while providing cost-containment and certainty for payers. In addition, in order to arrive at an accurate provider's cost, the Commission decided that the invoice price would be net of any rebates but also that actual and customary shipping costs for the implants additionally would be reimbursed."

What does this mean?

Well, using an invoice plus is better than a discount off billed charges, which has to be the most easily-gamed pricing methodology every conceived. Factoring in rebates is a good step as well; to my knowledge IL is the only state that considers the impact of rebates. And stating reimbursement is for the NET manufacturer's invoice price will help forestall gaming the invoice as well.

The challenge lies in determining what 'rebate' means, how it will be determined, reported, and factored into pricing, and how 'net' will be defined.

As I noted in a post a while back, The problem lies in the documentation of the paid amount. Most payers ask for a copy of the invoice, which, on the surface, makes sense - this is what was paid.

Not exactly. What the invoice doesn't show can include:

- volume purchase discounts

- rebates

- "3 for the price of 2" deals

- waste (some surgeons use the cage from one kit and screws from another, so the payer is paying for more hardward than is actually being used)

- internally developed invoices (documents prepared not by the supplier but by the provider)

This last point is the crux of the issue. Hospital systems often buy in bulk, with several implant kits shipped and billed; this obviously makes it impossible for the provider to produce the invoice for the device used in a specific surgery, as they never got one. Thus, many providers develop the invoice for a specific implant kit themselves.

There's another problem with implants - when they are defective, the patient has to go back in for more surgery. And the WC insurer has to pay. The only way to mitigate risk is to track the model and manufacturer for each implant - yes, it's work, and yes, it's work worth doing.

Finally, even the original invoice is for a device with a markup that is, well, huge. One analyst estimates gross margins are in the 80% range...driving profit margins that are the envy of any payer or health system.

The net? Kudos to IL for recognizing and addressing this issue. Now it will be up to payers to enforce the regulation, by demanding the actual invoice, not one developed in the basement. They may also want the provider's notarized statement that the invoice is the real, actual, honest-to-goodness true price net of rebates, discounts, etc.

Posted by at 7:37 AM | Permalink | Comments (3)

I've just about had it with the GOP's demagoguing about deficits.

The party of fiscal responsibility, of low taxes and small government, of controlled spending and personal responsibility - that party - seems to have rediscovered its roots of late, with strident calls for fiscal restraint, an end to wasteful government spending and strict adherence to pay-as-you-go guidelines.

This from the party that added over $9 trillion to the deficit the last time they passed a health care bill.

Let's return, for just a moment, to the early and mid oughts, the halcyon days of the Bush Administration, when the entire government was under the firm control of the fiscally prudent.

Here's what those wise stewards of the nation's wealth did.

Point One
Pass Medicare Part D with no funding - short term, long term, any term. Hell, they would've been more fiscally prudent if they'd included a few hundred million to bet on the horses. At least that would have shown some desire to pay for the thing. But no, the GOP decided to NOT set aside funds, or raise taxes, or cut other programs; they just passed Part D, committed to paying for it out of 'general funds' and to hell with the future.

The latest Medicare Actuary report indicates the GOP-passed Part D program has contributed $9.4 trillion to the $38 trillion Federal healthcare deficit. (page 126)

The Bush-era GOP makes President Obama, Pelosi, Reid, and the rest of those spendthrift Dems look like a bunch of cheapskates; even a GOP analysis finds "the new reform law will raise the deficit by more than $500 billion during the first ten years and by nearly $1.5 trillion in the following decade."

Point Two
Prevent CMS from basing reimbursement on effectiveness. As I said a couple months ago, "'the Republican Congress and Administration was responsible for preventing Medicare from considering any cost-benefit criteria in determining whether and what Medicare would pay for procedures, drugs, treatments, devices, etc. Yep, these deficit hawks thought it was just fine for we taxpayers to be forced to pay for procedures with very little efficacy. (Medicare Modernization Act)

Hmmm, wise stewards indeed...

How'd the GOP get away with this? Simple. The Republicans suspended Congress' PAYGO rules, the requirement that any bill that spent more money had to be offset by more revenue or cuts elsewhere.

By the way, those PAYGO rules? The Dems reinstated them.

From all the caterwauling from the GOP side of the aisle, you'd think that Mitch McConnell, John Boehner, Newt Gingrich et al were well practiced in the art of controlling spending, of not spending what you don't have.

And you'd be wrong.

According to the Wall Street Journal, speaking about a recent effort to extend unemployment benefits, McConnell said "The principle Democrats are defending is that they will not pass a bill unless it adds to the deficit," McConnell voted for both Part D and MMA.

Speaking about the health reform bill a couple months ago, Rep. Paul Ryan of Wisconsin, "the top Republican on the Budget Committee, said "Hiding spending does not reduce spending. We all know this bill is a budget Frankenstein. It is a house of cards. It is going to give us a huge deficits now and even larger deficits in the future." Ryan voted for Part D and MMA.

Here's party leader Newt Gingrich: "Republicans, I think, are going to draw a very firm line against any kind of tax increase that would kill jobs, and that's very hard for liberal Democrats to live with because all of their plans require bigger spending, higher deficits and more taxes, and it's a fundamental disagreement about the nature of the world."

I could go on, but you get the point.

What does this man for you?

I've had, and voiced, deep concerns about the health reform bill and its associated costs. What makes me, and should make you, really angry is the demagoguing by elected officials who've done exponentially more to damage our fiscal future than even the most pessimistic assessment of the health reform bill.

Posted by at 6:46 PM | Permalink | Comments (8)

Coventry Health will be taking a $278 million charge against earnings to cover the company's fine plus interest and legal costs resulting from last week's Louisiana appellate courte ruling in a workers comp PPO network case.

On a per-share basis, the bill is $1.18 pre-tax.

the charge will be partially offset by improved earnings from other sectors, including Medicare Advantage Private-Fee-for-Service. According to Zacks, the "2010 EPS outlook was also revised to $1.57−$1.72 in view of the impact of the charge, down from the prior range of $2.35−$2.50 per share. Excluding the charge, Coventry anticipates the EPS outlook to increase by 40 cents per share to range between $2.75 and $2.90."

Since moving back into the executive suite over a year ago, CEO and Chairman Allen Wise has done an excellent job turning the company around - refocusing the company on its core businesses, shedding underperforming and inefficient operations and profit centers, even revamping the way the company negotiates provider contracts to focus on Medicaid, Medicare, group, and individual health businesses.

The quarter-billion dollar charge is undoubtedly the subject of much discussion at the company's, executive committee meetings as it will suck cash out of the coffers that would have been used to acquire more regional health plans and help Coventry prepare for the post-reform health insurance world. It is also notable as it comes from a division, workers comp, which heretofore had been a cash machine, generating significantly more profits than its rather modest top line would predict.

For now, Coventry appears to be weathering the storm, recently announcing the acquisition of a couple of regional health plans and predicting continued improvements in operating earnings.

Whether this continues may depend in some part on the outcome of the company's appeal of the LA case.

Posted by at 9:30 AM | Permalink | Comments (0)

Yesterday's Louisiana appellate court ruling against Coventry's First Health work comp network is a major blow to comp insurers, employers, and networks in Louisiana, with potential impact in other states as well.

The ruling is here.

The court's finding supported a lower court's ruling affirming a state statute requiring PPOs to provide injured workers with PPO identity cards or give notice to providers 30 days before taking discounts. While Coventry will appeal to the state Supreme Court, the appellate court ruled against almost all of Coventry's arguments, making this an uphill battle for the nation's biggest work comp managed care firm. I'd also note that the decision itself takes Coventry's legal team to task for failings to accurately cite evidence in its written appeal, stating the "failure to provide record citations suggests that many of these assignments were interposed only for purposes of delay and confusion."

Ouch. (no pun intended)

While the finding may be bad enough, the size of the penalty is stunning - Coventry will have to pay $262 million - $2000 for each of the "131,024 instances in the past 10 years when it discounted providers' charges below the state workers' compensation fee schedule." (WorkCompCentral)

Some workers comp networks decided early on to avoid doing business at all in LA; MedRisk (HSA client) left the state after the initial ruling against Coventry along with several other PPO and specialty networks.

Implications

For Coventry, it doesn't look good. While I've taken the company to task in the past for what I perceive to be missteps, and some would argue that they should have pulled out long ago, it's hard to fault Coventry for believing they could conduct business in LA as they do in most other states, by contracting with providers to deliver discounted care to workers comp claimants. The additional notice requirements in Louisiana are unique to that state; in retrospect all networks should have picked up on this nuance, but in retrospect we all would have sold our stocks two months ago...

It doesn't look good for employers in Louisiana either. As MedRisk's General Counsel, Darrell Demoss noted in the WorkCompCentral piece, WCRI data suggests comp medical costs are significantly higher in Louisiana than in other states. Now that the ruling has been upheld, expect insurers and managed care organizations to avoid the state completely in fear that they too could be nailed by class-action suit.

On a national basis, this ruling will likely cause many network vendors and insurers to stop and very carefully review each state's laws and regulations pertaining to networks, with compliance staffs tasked with doubly ensuring their contracts comply with the letter and spirit of each jurisdiction's rules and regs. That's not a bad thing, as it's a heck of a lot cheaper to pay attorneys and compliance staff than a $262 million penalty.

What does this mean for you?

Except if you're a comp provider in LA.

Thanks to WorkCompCentral for the heads up.

Posted by at 10:17 AM | Permalink | Comments (3)

Anecdotal information indicates the comp injury rate is heading up just a bit. In email conversations with Jim Greenwood, CEO of Concentra, Inc., the nation's largest occ/urgent care clinic company, Jim sounded encouraged by the upward trend in the company's growth, particularly in an increase in patient visits.

Concentra is seeing its strongest growth "in the Great Lakes (Chicago, Michigan,
Indiana, Ohio and Western PA), followed closely by the Mid Atlantic / New Jersey / Philadelphia.

Texas is also doing well, but "activity levels in the southeast, far southwest and west coast [are] best described as moderate on a relative basis."

According to Greenwood, the growth in patient visits appears to be due to two primary factos: increased hiring in the transportation sector and greater market share for Concentra's clinics.

Department of Labor employment data doesn't necessarily correlate with Concentra's results. For example, Texas employment was up by 43,600 in May, and California saw 28,300 net new jobs that month; TX correlates with Concentra results but California doesn't. And, a spokesman for DoL noted: " the worst hit states remain the housing bubble states and manufacturing states around the Great Lakes...".

What does this mean for you?

If you're in the work comp services business, a little good news. Employment is clearly nowhere near where anyone would like it to be, but it is improving, if ever so slowly.

Posted by at 8:54 AM | Permalink | Comments (0)

Wolters-Kluwer, publisher of the Medi-Span pharmaceutical pricing database, just announced it will not stop publishing that database at the end of 2011, or any other date certain.

The reasoning behind the decision appears to be the lack of consensus around a replacement for the AWP standard.

According to W-K's press release, "discontinuation of AWP before development and industry-wide acceptance of a viable alternative price benchmark to replace AWP could create significant customer problems and confusion or disruption throughout the entire healthcare industry. We also recognize that changes to the data published in our drug information products may impact our customers' businesses and require significant lead time for them to make corresponding technical and contractual adjustments. It appears that consensus around a comprehensive alternative pricing standard will not be reached this year..."

Included in the release is a rather detailed discussion of precisely what the 'AWP' is - and is not. W-K has obviously taken notice of the litigation surrounding AWP, and the release, and further details provided in an accompanying document [opens pdf], provide a pretty very thorough primer on AWP and the W-K database's development, methodology, and limitations.

The rationale - there is no consensus on a replacement for AWP. rings true As flawed as AWP is, there are inherent problems with alternate pricing methodologies, problems that are not dissimilar from those associated with AWP. The most significant issue is the fact that AWP is NOT an Average nor a Wholesale Price. The MediSpan database is comprised of self-reported data, does not include all 'wholesalers' nor rebates and other behind-the-scenes financial transactions, and therefore does not reflect actual pricing. Similar issues plague Average Sales Price, Wholesale Acquisition Cost, and other metrics.

What does this mean for you?

This may motivate buyers and other stakeholders to get cracking on an alternate - either one of the current options or perhaps something new and different. What is abundantly clear is AWP remains flawed - at best. The failure of the industry to find a suitable alternative shows just how opaque the entire pharma pricing/rebate/cost picture is.

Posted by at 7:29 AM | Permalink | Comments (0)

The public spat between retail drug giant Walgreens and PBM/retail giant CVS Caremark ended last week. The first question most will ask is 'who won'? After asking that myself, I realized that's not the most important issue.

From here, it looks like the winners will be employers and members, who should be able to continue to access Walgreens thru Caremark (the giant PBM has some 2200 corporate clients and claims 53 million lives. As the financial details of the deal weren't (publicly) disclosed, we don't know if:

a) Caremark agreed to stop shifting Walgreens customers to Caremark mail order;

b) Caremark will stop trying to move members from Walgreens stores over to CVS (one of Walgreens' allegations)

c) Walgreens decided the pain was going to outweigh the benefits of dropping Caremark

d) the execs decided to set aside their concerns when their stock prices took a hit.

This last likely had some influence, as both companies (in theory) exist to serve their shareholders. Both entities' share prices declined after the spat became public; when the resolution was announced share values jumped 5% for each company.

Sources indicate that the deal included compromise on two key points - Caremark will continue to market PBM options that favor CVS stores and Walgreens will get their concerns about pricing inconsistencies addressed.

There's no question the loss of Walgreens, the nation's largest pharmacy chain with 7000+ stores, would have significantly hurt Caremark's marketing efforts, especially in New York, San Francisco, and other key markets where Walgreens is the dominant chain. And the timing was tough for the big PBM, coming just as large employers were making decisions about their 2011 benefit plans. Perhaps Caremark felt a bit of pressure from current customers, and decided to compromise rather than risk losing significant share to competitors Medco and Express Scripts.

Conversely, although Caremark's prescription business only accounted for 7% of revenues, the people picking up scripts also bought cosmetics, batteries, toiletries, and other products that probably accounted for a few more percentage points of revenue for Walgreens. In the low-margin retail pharmacy business, the loss of these profitable dollars would be very, very hard to offset.

What does this mean for you?

The takeaway for me is a renewed realization of just how interdependent providers and payers are.

As you think about markets in health care, it is helpful to remember most are highly mature with significant barriers to entry especially for payers.

Posted by at 9:00 AM | Permalink | Comments (0)

Yesterday the House passed legislation increasing Medicare physician reimbursement till November 30, when it is slated to drop by 23%. Then, barely a month later, physicians will see another cut which will cut their pay by another seven points.

The temporary fix will increase payments by just over two percent.

For six months.

Then the whole debacle/fiasco/mess will resurrect it's ugly head and we'll be right back where we are today, except the cost of an ultimate fix will then be close to $300 billion.

But that will happen after the fall elections, and well before the 2012 voting season starts.

On the workers comp side, several states will see their doc fee schedules change in step with Federal reimbursement, while the impact on most jurisdictions' fee schedules will play out over time as regulators and legislators work thru the politically-charged process, alter conversion factors and assess their potential impact on access and cost.

The indirect impact is likely to be much more significant as physicians and other providers billing CPT codes seeking to maximize reimbursement from private payers to offset (inflation adjusted) losses in revenue from the Feds.

For those interested in more detail, click here.

Posted by at 7:02 AM | Permalink | Comments (0)

Newsday broke a story yesterday about a former Islip, NY parks workers who was busted for insurance fraud.

But this isn't your typical "out on TTD, moonlighting as a handyman" gig.

Nope, John Livingston, out of work due to a comp injury and according to his statements to his employer and adjuster, unable to find employment, was allegedly working as a bouncer at a bar.

A nude bar.

It seems that the $17 grand Livingston collected so far wasn't enough to sustain his lifestyle and other obligations, so a man's got to do, what a man's got to do. In this case, what Mr Livingston had to do was ensure patrons didn't get unruly or obstreperous. Let's think about this. Livingston, who was employed as an automotive equipment operator, told the Town he couldn't work in that job, yet he was able to find work tossing potentially beefy, probably inebriated guys out of a 'gentleman's' club.

Livingston's previous job must've been much more strenuous than your typical truck driving gig, or perhaps he couldn't sit for long hours, yet could, without too much pain or chance for injury exacerbation, latch onto struggling guys and launch them thru the back door.

Or maybe this was part of his therapy and work conditioning program.

Livingston pled not guilty.

The Empire State has gotten rather forceful about comp fraud, so I'd expect Mr Livingston will come to regret his alleged decision to mess with the system.

Hats off (no pun intended) to the adjuster or employer who ordered the investigation (if in fact this was the result of surveillance) and busted Mr Livingston.

Posted by at 6:03 AM | Permalink | Comments (2)