Medical Cost Containment

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Medical Cost Containment What are the cost
drivers?

• Scott Brener, J.D.
• Vice President and General Counsel
• with SFM Mutual Insurance Company
• Dr. Nicholas Tsourmas
• Medical Director with Texas Mutual
• Shannon Pounds, J.D.
• Staff Attorney with Texas Mutual

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The Context - MN

• Injury rates have fallen dramatically in
  Minnesota

• Yet, costs since 1997 have taken a different
  trajectory

Paid claims per 100 full-time-equivalent workers,
injury years 1997-2008
System cost per 100 of payroll, 1997-2008
Minnesota Workers Compensation System Report,
2008
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The Context

• Medical benefits now cost more than wage benefits

medical
wage
medical
wage (inclusive of
vocational rehab benefits)
Minnesota Workers Compensation System Report
1999 and 2008
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The Context

• Similar injuries cost more in workers
  compensation than in general health

Robertson J, Corro D, Schaff D What Can Workers
Compensation Learn From Group Medical Insurance?
NCCI Research Brief July 2005
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The Current Controls

• Fee Schedule - Managed Care - Treatment
  Parameters
• did work at first

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The Current Controls

• Fee Schedule - Managed Care - Treatment
  Parameters
• and then not so good

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The Battlegrounds

• Provider Reimbursement / Fee Schedule
• Pharmaceuticals
• Hospital Costs
• Managed Care
• Treatment Parameters

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Provider Reimbursement/Fee Schedule

• Inflationary spiral
• Service coverage has eroded

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Pharmaceutical Dilemma

• Nationwide TX
• Dr. Nicholas Tsourmas
• Medical Director with Texas Mutual

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PRESCRIPTION DRUGSMisuse and Abuse
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AT THE NATIONAL LEVEL . . .
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FACTS

• Drug users at a minimum consume almost twice the
  medical benefits as non-users, are absent 1.5
  times as often, and make more than twice as many
  workers compensation claims.
  Source U.S. Center for Substance Abuse
  Prevention, NCADI
• Most people take prescription medications
  responsibly however, an estimated 48 million
  people (ages 12 and older) have used prescription
  drugs for non-medical reasons in their lifetimes.
  This represents 20 percent of the U.S.
  population. Source Online
  NIDA Research Report from the Director, April
  2006.

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PRESCRIPTION DRUG SPENDINGIncreased Spending is
primarily due to increased use. (Reinhardt et
al., 2004)
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PRESCRIPTION DRUG SPENDINGPrescription Drugs are
consuming more health costs. (Reinhardt et al.,
2004)
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TEXAS FACTS

• The total impact of alcohol and drug abuse in
  Texas cost the states economy an estimated 25.9
  billion for 2000.
• The cost is representative of significant direct
  and indirect costs in the form of reduced and
  lost productivity (43.1), crime (27.7),
  premature death (18.6), health care, law
  enforcement, property damage, motor vehicle
  accidents, and social welfare administration.
• On a per capita basis, this represents 1,244 for
  every man, woman and child in Texas.
• Source TCADA Media Archive, December 12, 2002

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Types of Drugs

• Hydrocodone, alprazolam, and benzodiazepine
  products continue to comprise the majority of
  prescription controlled drugs abused in North
  Texas.
• OxyContin has surpassed hydrocodone as the drug
  of choice for abusers seeking pharmaceuticals in
  the Tyler area.
• The most commonly abused pharmaceutical drugs in
  Houston continue to be Hydrocodone, Promethazine
  with Codeine and other Codeine cough syrups, and
  Benzodiazepines (mostly Alprazolam).
• OxyContin abuse is on the increase, with most
  illegal prescriptions being written by pain
  management doctors.
• In addition to the aforementioned, commonly
  abused pharmaceutical drugs in San Antonio
  include Morphine, Dilaudid, Diazepam, Xanax,
  Tussionex, Lortab, Vicodin, and Ketamine.
• 
  http//www.dea.gov/pubs/states/texas.html

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Threat Assessment

• The recent increase in the extent of prescription
• drug abuse in this country is quite likely the
  result
• of a confluence of factors, such as significant
• increases in the number of prescriptions
  significant
• increases in drug availability aggressive
• marketing by the pharmaceutical industry the
• proliferation of illegal Internet pharmacies that
• dispense these medications without proper
  prescriptions
• and surveillance and a greater social
• acceptability for medicating a growing number
• of conditions. Source Statement by National
  Institute on Drug
• Abuse Director Nora D. Volkow, M.D., before the
• Subcommittee on Criminal Justice, Drug Policy,
  and
• Human Resources, U.S. House of Representatives,
• July 26, 2006.

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• Illicit Finance
• Insurance fraud is used to finance the purchase
• of CPDs. According to law enforcement
• reporting, some individuals and criminal groups
• divert CPDs through doctor-shopping and use
• insurance fraud to fund their schemes. In fact,
  Aetna,
• Inc. reports that nearly half of its 1,065 member
• fraud cases in 2006 (the latest year for which
  data
• are available) involved prescription benefits,
  and
• most were related to doctor-shopping, according
• to the Coalition Against Insurance Fraud (CAIF).
• CAIF further reports that diversion of CPDs
  collectively
• costs insurance companies up to 72.5 billion

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• Individual insurance plans lose an estimated
• 9 million to 850 million annually, depending
• on each plans size much of that cost is passed
• on to consumers through higher annual premiums.
• CAIF also reports that a typical doctor-shopper
  can
• cost insurers between 10,000 and 15,000 per
  year
• in total costs related to diversion as well as
  emergency
• room treatment, hospital stays, physicians
• office visits, tests, and rehabilitation.

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Addressing the Issue

• RX Program
• Letter to treating doctor-medication profile
• Response-positive changes or no changes
• Peer Review
• Second letter with Peer
• Response-positive changes or no changes
• Telephonic contact with doctor by designated
  physician
• Consideration to MQRP

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New Solutions in MinnesotaPharmaceutical
Treatment Parameter Initiatives

• Scott Brener, J.D.
• Vice President and General Counsel SFM Mutual
  Insurance Company

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New Solutions- In Process

• New Solutions- In Process
• New treatment parameters for commonly used
  medications
• Rules requiring use of older, less expensive
  drugs in most situations
• Time and quantity parameters for the use of
  selected drugs for specific conditions

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Hospital Issues in Minnesota

• Scott Brener, J.D.
• Vice President and General Counsel SFM Mutual
  Insurance Company

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Hospital Costs

• More services are being provided by hospitals
• Hospital charges have risen faster than those of
  other providers (except pharmacies)
• Only a small proportion of hospital services are
  subject to meaningful cost controls

WC pays 85-100 of the bill compared to 46-65
paid by other types of insurance
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Hospital Costs

• Medical Fee Schedule
• Does not apply at all to small hospitals
• - They are paid 100 of whatever they bill for
  both in-patient and outpatient services
• ( small hospitals have less than 100 beds
  set by statute)
• And, there is no fee schedule for in-patient
  services at large hospitals- They are paid 85
  of whatever they bill for in-patient services

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Hospital Costs

• Implants
• Prior proposals included
• Limited mark-up
• 50 for devices 500
• 30 for devices from 500.01 to 1000.00
• 25 for devices gt 1000.00

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Managed Care in Minnesota

• Scott Brener, J.D.
• Vice President and General Counsel SFM Mutual
  Insurance Company

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Managed Care

• Number of plans has dropped from 10 in 1995 to 3
  currently
• Plans are not allowed to negotiate payments with
  network providers
• Plans are required to provide a large set of
  services even if duplicative of insurer
  activities
• Employees are not required to use the network

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Managed Care

• Research in a number of states shows that managed
  care reduces both medical indemnity costs with
  the same functional outcomes
• In other states, up to 15 of the reduction in
  costs is due to negotiation of fees with network
  providers
• In other states, costs are up to 10 lower when
  employees are required to use the network

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Treatment Guidelines

• Shannon Pounds, J.D.
• Staff Attorney with Texas Mutual

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Cost containment strategy treatment guidelines

• Texas adopted Official Disability Guidelines
  Treatment in Workers Compensation, effective May
  2007, for all non-emergency, non-network health
  care.
• Follow up to reforms to preauthorization
  requirements spinal surgery (2002), work
  hardening/conditioning and rehab services (2004),
  and PT/OT (2005)

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Timeline of the Reforms
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Cost containment strategy treatment guidelines

• Effects of reforms
• Excessive service utilization has reduced
  significantly since 2003
• Total costs decreased by 24
• Average claim cost lower by 17
• 12 from effects of preauthorization reforms
  (2006)
• 5 from effects of adoption of ODG (2007) and
  residual preauthorization effect
• Reductions mainly in physical medicine services,
  especially chiropractic services

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Cost containment strategy treatment guidelines

• Treatment guidelines not (yet) as effective as
  preauthorization reforms.
• Preauthorization reforms had immediate effects
  due to regulatory requirements
• No universal approach to how we use treatment
  guidelines
• Cannot just start denying care
• Prescription medications

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Cost driver legal challenges

• Gianzero v. Wal-Mart (filed 3/24/09)
• U.S. District Court of Colorado
• Class action (certified on 3/29/10)
• All persons who have received or have attempted
  to obtain, or will in the future receive or
  attempt to obtain workers comp benefits for
  compensable injuries sustained while an employee
  of Wal-Mart
• Violations of RICO and Colorado Consumer
  Protection Act

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• Gianzero v. Wal-Mart
• Allegation Defendants conspired to control and
  manipulate the system of medical care providers
  that provides medical treatment to employees of
  Wal-Mart who are injured on the job.
• Lead plaintiff injured thumb in 2005. ALJ found
  that
• Concentra delayed referral to specialist
• Treatment protocols did not cover chiro visits
• Preauth required for PT and specialist referrals

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Cost driver aging workforce

• Degenerative conditions
• Current science ? evidence-based medicine
• Disputes/acceptance of conditions, not body parts
• Strengthened causation standards
• Transcontinental Ins. Co. v. Crump, 2010 WL
  3365339 (8/27/10)
• Producing cause means "a substantial factor in
  bringing about the injury or death and without
  which the injury or death would not have
  occurred."

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• QUESTIONS?