Workers Compensation: Containing Costs and Protecting Workersg g

About KEMI

KEMI was created in 1994 by the Kentucky Legislature to begin writing workers’ compensation insurance g g ppolicies effective September 1995.

•KEMI is a COMPETITIVE mutual insurance companyKEMI is a COMPETITIVE mutual insurance company•KEMI is an INDEPENDENT, SELF-SUPPORTING organization•KEMI insures over 20,000 Kentucky businesses located in all 120 countiescounties•KEMI has a 20% market share of the workers’ compensation businessTh ti f KEMI b ht i ifi t titi t th•The creation of KEMI brought significant competition to the Kentucky workers’ compensation insurance market

Workers’ Compensation Coverage

• All Kentucky employers defined as anyAll Kentucky employers, defined as any person, other than one engaged solely in agriculture that has one (1) or moreagriculture, that has one (1) or more employees must provide workers’ compensation coverage for theircompensation coverage for their employees.

• An employee is any person in the service• An employee is any person in the service of an employer under any contract of hire.

MEDICAL BENEFITS

In Kent ck inj red orkers are entitled to• In Kentucky, injured workers are entitled to receive medical benefits related to the work injury for as long as they arework injury for as long as they are disabled, regardless of the duration of any income benefits i e lifetime medicalincome benefits, i.e., lifetime medical benefits.

COST CONTAINMENT MEASURES

1 MEDICAL FEE SCHEDULES1. MEDICAL FEE SCHEDULES2. MANAGED CARE3 MEDICAL BILL EXPERT SYSTEMS3. MEDICAL BILL EXPERT SYSTEMS4. PHARMACY BENEFIT MANAGERS

(PBM’s)

MEDICAL FEE SCHEDULES

The Commissioner of the Department of• The Commissioner of the Department of Workers’ Claims shall adopt regulations which put in place a schedule of fees towhich put in place a schedule of fees to ensure that all fees are fair, current and reasonable (1994)reasonable. (1994).

1. A physicians fee schedule is updated every two years on July 1every two years on July 1.

2. A hospital fee schedule is updated yearly.

3 A pharmacy fee schedule is also3. A pharmacy fee schedule is also regulatory and is updated as needed.

Physician Fee Schedule

• Covers all medical services provided to injured employees by physiciansinjured employees by physicians

• Applies to all health care or medical services providers to whom a CPT code isservices providers to whom a CPT code is applicable

• Provides maximum fees allowable for the service provided

• Balance billing the patient is prohibited

Hospital Fee Schedule

• Applies to all workers’ compensation patient hospital fees for each hospital forpatient hospital fees for each hospital for each service or supplyC t t Ch ti l l t d f h• Cost-to-Charge ratio calculated for each hospital by the Department of Workers’ Cl iClaims

• Total allowable charges multiplied by the cost-to-charge ratio for that hospital

Pharmacy Fee Schedule

Pharmacists are entitled to be reimb rsed• Pharmacists are entitled to be reimbursed for the equivalent drug product wholesale price plus a five dollar ($5) dispensing feeprice plus a five dollar ($5) dispensing fee

• Based on generic drugs unless prescriber indicates brand name only

• Balance billing the patient is prohibited

MANAGED HEALTH CARE

Kentucky statutes provide for the usef d h lth t bof a managed health care system by

employers, i.e. insurers.

MANAGED HEALTH CARE

• The employee shall be allowed choice of provider from within the plan

• Statements for services shall be auditedregularly to assure that charges are notregularly to assure that charges are not duplicated and do not exceed those authorized in the applicable fee schedules.authorized in the applicable fee schedules.

MANAGED HEALTH CARE – CON’T

• Established procedures for utilization review of medical services to assure that:– a course of treatment is reasonably necessary;– diagnostic procedures are not unnecessarily

d plicatedduplicated;– the frequency, scope, and duration of treatment is

appropriate;– pharmaceuticals are not unnecessarily prescribed;– and that ongoing and proposed treatment is not

experimental cost ineffective or harmful to theexperimental, cost ineffective, or harmful to the employee

MEDICAL BILL EXPERT SYSTEMS

• Software that provides a medical bill review to ensure billing accuracy removesreview to ensure billing accuracy, removes duplicate charges, corrects coding errors and inappropriate bundling or unbundlingand inappropriate bundling or unbundling of charges for services rendered by medical providersmedical providers

• Detects billing errors that are difficult for th h tthe human eye to see

PBM’s

• Process and pay prescription drug claimsM i i f l• Maintain formulary

• Negotiate discounts and rebates with drug manufacturers that are passed on to insurance carriers

• Provide clinical tools to detect inappropriate prescribing, medication pp p p g,errors, and compliance

EFFECTIVENESS

1. FEE SCHEDULES – Generally effective2 MANAGED CARE Eff ti i2. MANAGED CARE – Effective in

preventing “doctor shopping”; physician utilization reviews provide medicalutilization reviews provide medical analysis (not layperson); bill audits

3 EXPERT SYSTEMS Very Effective in3. EXPERT SYSTEMS – Very Effective in preventing duplicate billing, coding errors

4 PBM’s Very Effective in lowering drug4. PBM s – Very Effective in lowering drug costs

CONCERNS?

UNANTICIPATED CONSEQUENCES?UNANTICIPATED CONSEQUENCES?• Attempts to circumvent the system• Court decisions

AFFECT ON PATIENT CARE?• Benefits to patient care• Benefits to patient care

IMPROVEMENTS

• Regulators and Judges need to be awareRegulators and Judges need to be aware of current industry trends

• Elimination of Hospital cost to charge ratio• Elimination of Hospital cost-to-charge ratio

ADDITIONAL MEASURES / AREAS FOR REVIEW

• Treatment GuidelinesTreatment Guidelines• Repackaging of Drugs

Ph i i di ti ti t t ti l• Physician directing patient to particular pharmacy provider

TREATMENT GUIDELINES

• Practice parameters (guidelines) forPractice parameters (guidelines) for clinical practice for use by medical providersproviders

• Provide consistency and expectations for patient carepatient care

• Limitation on extent and duration of ll bl t t t l l iallowable treatment unless approval is

granted

PRESCRIPTION REPACKAGING

• Physicians buy medications in bulk fromPhysicians buy medications in bulk from prescription warehouses and resell them in smaller packages at a substantial profitin smaller packages at a substantial profit

• WCRI 16 state study found that in at least one state this pushed drug costs to 38%one state this pushed drug costs to 38% above the median of the other states in the studystudy

REPACKAGING WEBSITE:

• It is not unusual for a physician to earn over $100,000 or more every year by dispensing $ , y y y p gmedication to workers compensation patients.

• That’s right, our simple, easy and profitableli i h fl h d h dprogram eliminates cash flow headaches and

guarantees payment from workers compensation claims in 30 dayscompensation claims in 30 days.

• Get paid a generous dispensing fee every month that could earn you tens of thousands of dollars or more each and every month.

PHYSICIAN DIRECTION OF PHARMACY

• Physicians require or strongly encourage• Physicians require, or strongly encourage, patients to receive medications from a mail order pharmacyorder pharmacy

• Pharmacy charges the insurance carrier th f ll f h d l i hi h ithe full fee schedule price which is generally 25% greater that price obtained th h PBMthrough a PBM

MAIL ORDER PHARMACY WEBSITE

W hi di i i h li• We ship medications right to your clients and the insurance company pays us.

• Plus, continuity of prescription care ensures continued office visits…

CONCLUSION

• When cost containment measures are in l d li d i t lplace and are applied appropriately,

benefits and savings can be seen.• Benefit patients by affording appropriate,

not excessive, care• Lower claim costs result in lower

premiums for employersp p y