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Opioids and Workers’ Compensation: A Monkey on California’s Back Jeffrey Miller, December 2011Workers’ compensation costs for California employers are on the rise. According to a recent survey conducted by the Council of Independent Agents and Brokers, 31 percent of brokers in the Southwest (including Southern California) and 50 percent of brokers in the Northwest (including Northern California) reported seeing increased pricing for workers’ compensation coverage during the most recent quarter. A significant driver behind the increases is medical cost inflation. The California Workers’ Compensation Institute (CWCI) recently reported that the average amount paid for medical treatment for an indemnity claim has increased nearly 52 percent since accident year 2005. More striking among these results is that, for the same period, the average cost of prescription drugs and durable medical equipment per indemnity claim increased nearly 95 percent, and reimbursements for opioid narcotic prescriptions jumped from 3.8 percent to 23.6 percent of the total drug and equipment cost. This is consistent with nationwide experience; according

to the National Council on Workers’ Compensation Insurance, about one quarter of all nationwide prescription drug expense now pays for opioid narcotics.What are Opioids?

As the name implies, this family of drugs includes natural derivatives of opium and synthetic compounds having effects similar to opium. Among the world’s oldest drugs, opioids are used medicinally for pain management, and non-medically for the feelings of euphoria they produce. Most opioids are classified by the U.S. Drug Enforcement Administration as Schedule II controlled substances, indicating a high potential for abuse and severe psychological or physical dependence. Such abuse has lead to grave consequences. According to the Centers for Disease Control and Prevention, opioid painkillers have surpassed heroin and cocaine as the leading cause of drug overdose fatalities in the U.S. Problems with Opioids

The legal and illegal use of opioids

has become increasingly popular. According to the National Center on Addiction and Substance Abuse at Columbia University, between 1998 and 2008, Schedule II opioid use increased by 380 percent while the use of all prescription medications rose 61 percent. The Center noted that hospital admissions related to prescription narcotic abuse increased 400 percent and related deaths tripled during the study period. The Center further indicated that more than 6 percent of the population of the United States admits to abusing prescription drugs, surpassing the total of all other forms of drug abuse. For California employers, another issue is prescribing opioids to treat conditions or patient types for which opioids are not effective. While such prescriptions by physicians are legal, their appropriateness, safety and efficacy can be questionable. According to a CWCI study published in March 2011, nearly one half of opioids prescribed for workers’ compensation claims are for minor back injury claims with no spinal cord involvement. The

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Paladin Quarterly Newsletter December 2011 Issue

CONTENTSJeffrey Miller: Opioids and Workers’ Compensation: A Monkey on California’s Back

Case Study: Insurer Sees Big Savings on Small Surgery Bill

Medcor 24/7 Nurse Triage

Paladin Selects Mitchell

A SeaBright Holdings Company

American College of Occupational and Environmental Medicine has stated that the use of opioids is “typically not useful in the sub-acute and chronic phases” of these injuries – in other words, opioids should not be taken for long term pain management. The CWCI study concluded that prolonged use of opioids in these minor injury cases was associated with delayed recovery, accompanied by escalated medical costs and a higher likelihood of litigation. Add the increased risk of addiction and other complications, and the problem becomes clearer: inappropriate opioid use can worsen medical outcomes. Another emerging issue is that the majority of opioid prescriptions in California are written by a small minority of doctors. According to the CWCI study cited above, the 10 percent of physicians who wrote the greatest number of prescriptions for opioids for injured workers accounted for nearly 80 percent of all such prescriptions and 88 percent of the associated payments. Similarly, the 3 percent of physicians that wrote the most opioid prescriptions wrote 50 percent all such prescriptions, comprising two thirds of the total expense for these drugs. Also interesting is that the 1 percent of doctors who wrote the greatest number of opioid prescriptions also prescribed significantly higher dosages – on average, 24 percent more potent than all others. While it is possible that some of these physicians prescribe more opioids or higher doses because of their given specialty, there is also evidence that suggests “doctor shopping”. In the same study, the CWCI looked at the top 10 percent of injured workers who consumed the most opioids and noted that, on average, these claimants were receiving these drugs via prescriptions from 3.3 physicians, as compared to the overall average of 1.9. Put simply, the injured workers who took the most opioid narcotics were visiting more doctors to get them.Yet another problem is diversion, where drugs are being given or sold to others for non-medical use. U.S. Drug Enforcement Agency data indicates that opioids are the most commonly diverted prescription drugs. According to a 2010 study conducted by the U.S. Department of Health and Human

Services, 55 percent of non-medical users of prescription pain medications obtained the drugs they used most recently from a friend or relative for free. Another 11.8 percent bought them from a friend or relative, and 4.8 percent took them from a friend or relative without asking. Implications for workers’ compensation are that, when diversion takes place, the claim dollars spent on these drugs are not providing any beneficial effect on the injured worker’s recovery. Further, such diversion creates demand for additional quantities of opioids, especially when they are being sold by the claimant to others, driving claim expense upward for insurers and self-insured employers.Taking the Cure

The problem of over-prescription of opioids will continue to worsen if no action is taken. The consequences are measured in dollars and in human lives as well. Employers, insurers, and legislators must act soon to turn the tide.One solution may be to legislatively mandate procedural controls. For example, the Washington Department of Labor and Industries established opioid use guidelines that require greater documentation and management for use of opioids beyond the acute and subacute phases of injury recovery. Resulting from these guidelines, in 2010, Washington State saw a 50 percent reduction in opioid-related fatalities among its workers’ compensation claimants, and since 2007, a 25 percent decline in average daily doses prescribed. Following these changes, the Washington State Legislature proposed a bill imposing restrictions on non-cancer pain management, and despite a partial veto, many of its beneficial provisions became law. Similarly, the State of Colorado has set strict guidelines relating to patients receiving opioids for extended periods.Drug testing is an effective solution available for employers. With each new hire comes the risk of an existing opioid dependency or addiction. Employees using opioids are at higher risk for accidental workplace injury due to impaired function, or intentional injury as a means to obtain new prescriptions for opioids and paid time off to abuse

them. An effective employee drug testing program, including pre-hire and post accident testing, can eliminate many such claims and send a strong message that drug abuse will not be tolerated. A drug utilization review program can serve as yet another line of defense. Available via some insurers and medical management services providers such as Paladin, these programs scrutinize narcotic prescriptions to identify off-label uses and dosages that may exceed safe levels for the condition. Some of these programs also employ a retrospective review that identifies fraud, abuse, duplicate therapies, and excessive use of opioids. Both types of review work with the prescribing physician to promote awareness of the issues identified and press for safer, non-opioid alternatives.Finally, for those acute claims where narcotics have already been prescribed and little progress towards recovery has been achieved, intervention by a qualified workers’ compensation physician can make a real difference. These specialist doctors consult peer to peer with treating physicians to share proven treatment options for specific injury types, and can offer guidance on safer, more effective pain management for longer-term cases. For those treating physicians who write a significant number of opioid prescriptions, the involvement of an independent workers’ compensation physician can have a “sentinel effect”, when a colleague is watching their prescribing practices and is prepared to intervene.The increasing opioid use trend is a serious cause for concern for insured and self-insured employers alike, along with the insurance community. Fortunately, as it is with drug abuse itself, once the problem is recognized, there are effective steps towards cure that can be taken.

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Paladin’s Medical Bill Review service delivers superior results for insurance companies, self-insured employers, public entities and third party administrators. While our physician-centric review process yields substantial savings for high-cost, complex medical treatments, it can also be very effective on smaller bills and for routine procedures. This consistent performance adds up to exceptional overall results for our clients while maintaining high-quality care for injured workers.

Customer ProfileOne of Paladin’s largest clients is a specialty workers’ compensation insurer that provides coverage and service to selected industry niches nationwide. The insurer has a strong reputation for providing high-quality, responsive services that help policyholders achieve improved loss results and greater long-term control of insurance costs.

Situation A construction worker lost his footing while working from scaffolding at a job site. He fell twelve feet to the ground and fractured his wrist. The worker had surgery to repair the fracture and began his recuperation. After the surgery was performed, the insurer was billed a total of $4,954, which contained a surgery charge and a separate fee for cleaning of the wound (debridement and irrigation). Because the bill included multiple procedures, Paladin’s Medical Bill Review system automatically referred the bill to one of its physicians for handling.

SolutionPaladin’s physician analyzed the medical report and corrected the billing to match the California fee schedule. In reviewing the appropriate procedure code in the fee schedule, our physician also determined that the separately itemized charge for cleaning of the wound was incidental to the primary surgical procedure that was performed, concluding that a separate charge for those services was not valid. As a result of this review, the provider accepted payment of $667 for the surgery.

The Bottom LineThe injured worker in this case received the quality care needed to repair the injury and facilitate rehabilitation. He is receiving physical therapy to assist in his recovery, and his doctors expect a return to work in the near future. As in all bill review cases, the bill review process commenced after the worker received treatment. Paladin’s due diligence in this case resulted in successfully saving its client $4,287 of the original $4,954 bill, an 86% reduction. For the client, whose costs for bill review are based on a percentage of savings and is affected by the volume of bills, number of open claims and the client’s historical trend, this example of Paladin’s medical bill review yielded an ROI of $7.25 for every dollar spent on medical bill review. Without compromising the care of the injured worker, Paladin was able to materially reduce the client’s overall medical expense liability in this case.Paladin’s medical bill review service works for all provider bills, big and small, ensuring that only the appropriate amount is paid every time and delivering proven results for all of our clients. The Paladin Managed Care team constantly works to improve our review process and introduces new methods that capture even greater savings opportunities for our customers. Paladin also employs a built-in quality assurance tool that tests the integrity and validity of bill coding decisions, fee schedules and PPO network discounts, ensuring they are applied correctly to all bills. As with all of Paladin’s services, medical bill review helps our clients receive high-quality, effective treatment for their injured workers while vigilantly monitoring and controlling costs.

Case Study: Insurer Sees Big Savings on Small Surgery Bill

Paladin Managed Care Services recently announced the launch of a new 24/7 Nurse Triage program for its clients, including self-insureds, insurance companies, public entities, and third-party administrators. The new program immediately directs an injured worker to the most appropriate and effective medical treatment option after a work-related injury occurs. This minimizes costs arising from unnecessary visits to the emergency room. It also helps assure that the type and source of treatment best fits the injury, whether it be first aid at the employer’s facilities, or specialized treatment at an in-network occupational health clinic. This new service is available through a new business alliance Paladin has forged with Medcor, a leader in workplace injury triage.

The 24/7 Nurse Triage program is Paladin’s latest addition in its ongoing expansion of its comprehensive suite of managed care services. With this offering, employees can call triage-trained registered nurses at any time, day or night, for prompt assistance in assessing the severity of their injuries and determining the best course of action. This reduces costs and improves care by identifying upfront the best and most cost-effective treatment option for the injury, according to evidence-based medicine and the best judgment of triage nurses experienced in emergency and urgent care. Paladin’s new program drives improved medical outcomes at reduced cost, higher productivity, and lower administrative costs for its clients.

Paladin chose Medcor because of its high quality service and proven effectiveness. With 14 years of workers’ compensation triage experience, Medcor has received URAC Health Call Center accreditation, complementing Paladin’s own URAC accreditation for Workers’ Compensation Utilization Management. Medcor’s superior quality is demonstrated by a 98% satisfaction rate among its triage users. Further, for 2010, Medcor reported that, on average, offsite medical treatment was not needed in 48% of its clients’ injury cases. Results of this magnitude are well aligned with Paladin’s overall mission to deliver highly-effective medical care at substantial savings to its clients.

Jeffrey Miller, Paladin’s COO, said “Our new Nurse Triage program further strengthens Paladin’s comprehensive suite of services available nationwide. Our clients can now achieve even better savings and medical outcomes from this powerful enhancement to our cutting-edge, medical management service platform. This new alliance with Medcor, a long-established industry leader, signals our continued commitment to supplying best in class services and service providers that exceed our clients’ exacting needs.”

Paladin’s new Nurse Triage program is further proof of Paladin’s commitment to providing an expanding array of services that deliver superior results on which clients can rely.

A SeaBright Holdings Company

Medcor 24/7 Nurse Triage Program

Paladin Managed Care Services, Inc., a leading physician-centric medical management company and a wholly-owned subsidiary of SeaBright Holdings, Inc. (NYSE: SBX), recently announced that it has selected Mitchell International, Inc., a leading provider of technology, connectivity and information solutions to the Property & Casualty claims and Collision Repair industries, as its medical bill review solutions provider of choice. Paladin, previously an Ingenix PowerTrak client, will fully migrate to Mitchell’s industry leading SmartAdvisor™ medical bill review software platform to streamline medical claims management and contain costs.Jeffrey Miller, chief operating officer of Paladin Managed Care Services, Inc., said, “We look forward to working with Mitchell to further streamline our medical claims processing operations and optimize the cost containment services that we provide to our clients nationwide. Aided by the superior performance and efficiency we expect from the Mitchell system, our physicians and other medical bill review experts can now achieve even greater cost savings for our clients without compromising high-quality, effective care for injured workers.”“We are pleased to welcome Paladin to Mitchell,” said Nina Smith-Garmon, senior vice president and general manager of the Mitchell Workers’ Compensation Solutions Division. “This new alliance is a compelling example of the speed and success of the integration of the Ingenix P&C business, which we acquired in 2010, into the Mitchell family. Paladin’s decision to use Mitchell for all medical bill review processing speaks to the superior quality of our technology-enabled claims processing solutions as well as to the strength of our client relationships.”Mitchell SmartAdvisor is a comprehensive bill review solution for workers’ compensation that combines performance software with client services and best-in-class partnerships. SmartAdvisor’s unique capabilities include customizable workflow modeling, Capstone business decision rules engine, data analytics and reporting tools, Claims Examiner Portal for fast, secured, real-time access to bill data, and a proven technology platform that delivers on average 50-70% straight-through processing for improved efficiencies and lower costs.

A SeaBright Holdings Company

Paladin Selects Mitchell

Paladin Managed Care Services1901 Eas t A l ton Avenue , Su i te 20 0 , Santa Ana , CA 92705(80 0) 559-5556 in fo@paladinmc.com www.paladinmc.comSales and Marketing Department (949) 732-2400 sales@paladinmc.com