California Orthopedic Association California …• Temp Disability • Perm Disability • Voc Rehab • Litigation D. Segment: Medical Services • Outpatient • Inpatient A. Segment:

CWCI 2011. All rights reserved

California Orthopedic Association

Current Issues in the California Workers’ Compensation System

Alex Swedlow

EVP, Research

California Workers’ Compensation Institute

www.cwci.org

Exhibit 2


• Established in 1964;

• Private, nonprofit organization of self-insured employers

and insurers representing over 90% of premium dollars;

• Dedicated to improving the California workers’

compensation system through four primary functions:

� Education

� Information

� Representation

� Research

CWCI: Background

Exhibit 3


Agenda

• CWCI Research Primer

• Data, Benchmarks and Scorecards

• Current Industry Trends

• Examples of System Cost Drivers

- Back Injuries, Surgery and Surgical Hardware

- Schedule II Opioids

Exhibit 4


Agenda

Industry Claim Information System (ICIS)

• Voluntary Data Submissions

• Collaborative Research Model

• Industry Trends and Benchmarks

Exhibit 5


Industry Claim Information System (ICIS)

C. Payment Transactions• Temp Disability• Perm Disability• Voc Rehab• Litigation

D. Segment: Medical Services• Outpatient• Inpatient

A. Segment: Policy• Employer Characteristics

B. Segment: Claim• Employee Characteristics• Injury Characteristics

ICIS Database Segments

Exhibit 6


•Scorecard Series

- Injury and Industry Outcomes

•Cost Drivers

- Injury Rates and Descriptors

- Litigation

- Return-to-Work

- Regional Differences- Medical Utilization and Cost

- Pharmacy

Measuring Trends and Benchmarks

Exhibit 7


Trends and Benchmarks

Leading Injury Categories: Back Injuries

Exhibit 8


Trends and Benchmarks

Spine Injuries: Causes of Injury

Exhibit 9


Injury Trends and Benchmarks

Other System Dynamics

Exhibit 10


27,847

33,16237,977

42,74145,872

50,017 49,19045,652

39,936 38,656

44,944

51,612

58,41861,664

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: WCIRB

Total Loss Development (Insured Employers)

Estimated Ultimate Total Loss Per Indemnity Claim- as of Sept 2010 -

+60%

Exhibit 11


13,07015,728

18,95821,834

24,18927,223 27,580 26,108

24,453 25,346

29,584

34,511

39,47542,613

$0

$10,000

$20,000

$30,000

$40,000

$50,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: WCIRB

Medical Development (Insured Employers)

Estimated Ultimate Medical Per Indemnity Claim- as of Sept 2010 -

+74%

Exhibit 12


$0

$4,000

$8,000

$12,000

12 M $5,433 $4,970 $4,439 $4,376 $4,879 $5,480 $6,038 $6,518

24 M $8,522 $8,229 $6,741 $6,939 $8,107 $8,734 $9,438

2002 2003 2004 2005 2006 2007 2008 2009

Sub-Category of Average Medical Benefits Paid

Medical Treatment, Indemnity Claims

+49%

+40%

Exhibit 13


$0

$600

$1,200

$1,800

$2,400

12 M $412 $505 $639 $623 $871 $1,051 $1,290 $1,511

24 M $649 $809 $908 $971 $1,296 $1,572 $1,818

2002 2003 2004 2005 2006 2007 2008 2009

Sub-Category of Average Medical Benefits Paid

Medical Management, Indemnity Claims

+143%

+100%

Exhibit 14


Medical Management

Utilization Review as a Percent of MCC @ 24M

8.9% 8.6%

18.8%

23.2%

31.6%34.2%

0%

10%

20%

30%

40%

2003 2004 2005 2006 2007 2008

Exhibit 15


Managing Medical Management

Why is workers compensation medical so much harder to manage?

1. Rules, regs and institutional memory2. Benefit variation3. Lack of supply and demand side controls:

• Co-payments & deductibles• Contractual language• Dispute resolution

4. Liens

Exhibit 16


Changes in Inpatient Utilization

Source: CWCI 2008

• Follow-up to 2001 study

• Utilization of Inpatient Services

• Analysis of Back Surgery

• Comparison to other health systems

- Group Health

- MediCare

- Medi-Cal

� Surgical Implants

Exhibit 17


31,348 30,73629,247

27,542 26,552

0

10,000

20,000

30,000

40,000

2002 2003 2004 2005 2006

Inpatient AdmissionsCY 2002 - 2006

Source: CWCI 2008

-15%


Exhibit 18


11,23710,640

9,9209,021

8,385

0

5,000

10,000

15,000

2002 2003 2004 2005 2006

Medical and Surgical Back AdmissionsCY 2002 - 2006

Source: CWCI 2008

-25%


Exhibit 19


0

1

2

3

4

5

WC 3.3 3.3 2.5

All Other 3.9 3.5 2.6

LOS All Proc Surg Proc

WC vs. Non-WC Inpatient Surgical Back Profile

Source: CWCI 2008

Case-mix Adjusted Discharge Outcomes2002 - 2006


Inpatient Hospital Fee Schedule pays 120% MediCare’s global FS (includes surgical implants)

Plus

Pass-through payment for surgical implants Documented paid cost plus 10%

Double Payment for Surgical Implants

• Studies suggests pass-through diminishes incentives to manage selection or cost of implants

• Formula under review for revision


Cost Analysis of Surgical Implants: Preliminary Results

4,776

1341520 - Cervical Spinal Fusion w/o cc

359519 - Cervical Spinal Fusion w cc

1378498 - Spinal Fusion Except Cervical w/o cc

967497 - Spinal Fusion Except Cervical w cc

731496 - Combined Anterior/Posterior Fusion

2006

CasesBack DRGs Eligible for Pass-through

1 Kominsky & Gardner, CHSWC, 2001

• Special database with implants (2005-2007)

• Compare implant costs against 2001 Study1

• OSHPD discharge database


$16,000

$63,890

$8,000 $8,821

0

10000

20000

30000

40000

50000

60000

70000

LOW HIGH2001 2007

DRG 496 - Combined Anterior/Posterior FusionRange of Surgical Implant Payments

Preliminary Results

Source: Kominsky & Gardner 2001

CWCI 2009


$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

LOW $8,821 $4,450 $1,431 $3,185 $2,643 $6,137

MEAN $25,478 $13,092 $16,416 $14,239 $10,870 $15,409

HIGH $63,890 $44,436 $55,716 $34,387 $42,266 $49,304

496 497 498 519 520 5 DRGs

Source: CWCI 2009

CWCI’s 45th Annual Meeting of Members

Range of Surgical Implant Payments

Preliminary Results


$191

$1,782

$5,804

$0

$2,500

$5,000

$7,500

Low Mean High

Carpal Tunnel

Range of Outpatient

Surgery Facility Payments (2001)

Prior Example of Excess Cost VariationOutpatient Surgery Facility Payments

Source: CWCI 2001


Average Facility PaymentPre-Fee Schedule (2001) & Fee Schedule (2005)

Source: CWCI 2005

$1,782$1,899

$983$1,120

$0

$500

$1,000

$1,500

$2,000

Carpal Tunnel All Procedures

Adj 2001 FS 2005

-41%-45%

Exhibit 26


Changing Role of Rx in Workers’ Compensation

1. Growing use of pharmaceuticals

2002: 5% of medical benefits

2010: 13% of medical benefits (NCCI estimate)

2. Reforms in pricing and fee schedules

3. Growing influence of pain management practices

4. Legislative, administrative and payor responses

Areas of CWCI Rx Research

Exhibit 27


1. Repackaged Drugs

2. Opioids & Schedule-II Rx

Areas of CWCI Rx Research

Exhibit 28


Source: CWCI 2005

• Exempt from MediCal fee schedule

• Reimbursement level reverts to prior FS

�110% of AWP for brand

�140% of AWP for generics

• Repackagers set AWP

Repackaged Drugs (pre-reform)


$255.56

$126.74

$25.64$25.90

$0

$50

$100

$150

$200

$250

$300

Ranitidine Naproxen

Pharmacy RepackagedSource: CWCI 2006

+887%

+394%

Pharmacy vs. Repackaged DrugsAverage Paid per 100 Units (2006)

Before…

Exhibit 30


• DWC regulation implemented March 2007

• Eliminates the repackage “loop-hole”

• Sets price at pharmacy fee schedule

Repackaged Drugs Update


$40.69

$45.43

$37.44

$28.65

$0

$10

$20

$30

$40

$50

Ranitidine Naproxen

Pharmacy Repackaged

Pharmacy vs. Repackaged DrugsAverage Paid per 100 Units (2008)

-30%

-18%

After…

Source: CWCI 2008

Exhibit 32


0%

20%

40%

60%

Pcnt Scripts 57.6% 53.8% 39.5% 18.9% 15.6% 12.9% 11.3% 9.6% 8.1% 6.5% 6.1% 3.7%

Pcnt Pymts 57.5% 57.5% 43.3% 13.1% 11.5% 8.6% 7.9% 5.9% 5.0% 3.9% 3.9% 2.5%

2005 20062007-

Q1

2007-

Q2

2007-

Q3

2007-

Q4

2008-

Q1

2008-

Q2

2008-

Q3

2008-

Q4

2009-

Q1

2009-

Q2

Pharmaceutical Utilization & Cost: Repackaged Drugs1

1 Calculations are on a calendar year basis

-93%

-95%

Exhibit 33


0%

5%

10%

15%

20%

25%

Pcnt Scripts 1.4% 1.8% 2.2% 3.1% 3.4% 4.1% 5.0% 5.4% 5.4% 5.7% 5.7% 7.2%

Pcnt Pymts 3.8% 4.3% 5.2% 10.1 12.1 13.7 16.8 18.1 18.5 19.3 19.3 23.6

2005 20062007-

Q1

2007-

Q2

2007-

Q3

2007-

Q4

2008-

Q1

2008-

Q2

2008-

Q3

2008-

Q4

2009-

Q1

2009-

Q2

Pharmaceutical Utilization & Cost

Schedule-II Opioid Drugs1

1 Calculations are on a calendar year basis

+414%

+521%

CWCI 2011. All rights reserved0.8%1.6%Other Schedule II

2.8%1.7%Oxymorphone

1.3%3.7%Hydromorphone

0.6%6.3%Methadone

32.2%14.6%Fentanyl

16.9%18.6%Morphine

45.4%53.1%Oxycodone

% Schedule-II Prescription $

% Schedule-II Prescriptions

Schedule II Drug Category

CWCI Research Spotlight Report (Sept 2009)

Schedule II Prescription & Payments in CA Workers’ Comp

Top Schedule-II Drugs by Active Ingredient

Exhibit 35


Opiod Prescriptions on Low Back Claims

0%

25%

50%

75%

100%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Scripts per Claim

Pc

nt

of

All C

laim

s w

ith

Na

rco

tic

s

Low back injuries w/ opiods typically receive 5.2 prescriptions per injury

Background on Pain Management

Exhibit 36


ACOEM Insights on Opioids

- Opioids in the management of chronic pain do not consistently and reliably relieve pain.

- It also overall demonstrates a decrease in quality of life and functional status

- The use of opioids during the sub-acute and chronic phases of an injury, especially in the absence of an objectively identifiable pain generator, cannot be recommended.

Genovese, Harris, Korevaar 2007

Exhibit 37


Report to the Industry

What is the association between the use of opioids on low back pain on:

• Average Benefit Costs- Medical- Indemnity

• Return To Work

Rx & Pain Management

Exhibit 38


Pain Mgt and the Use of Opioids

Study Population

• 166,336 California injured workers

• Medical back conditions without spinal cord involvement

• Dates of Injury: 2002 through 2005

• A total of 854,244 opioid prescriptions were dispensed

• Controls (morphine equivalents) for different types of opioids

• Case-mix adjusted outcomes

Source: CWCI 2008

Exhibit 39



Average Benefit Cost Outcomes

$0

$5,000

$10,000

$15,000

$20,000

$25,000

No MEs $6,733 $3,207 $3,526

Level 1 $6,499 $2,938 $3,561

Level 2 $10,550 $4,411 $6,139

Level 3 $14,950 $6,356 $8,594

Level 4 $20,389 $9,488 $10,901

Total Benefits Medical Indemnity

+203%

+196% +209%

Source: CWCI 2008

Exhibit 40



Return to Work: Paid Temp Disability Days

0

20

40

60

80

100

120

140

No MEs 21.3 62.9

Level 1 21.3 66.9

Level 2 38.8 84.2

Level 3 60.6 102.3

Level 4 99 138

All Claims Indemnity Claims

365%

119%

Source: CWCI 2008

Exhibit 41


• Opioid use back injury frequently exceeded recommended guidelines

• High levels of opioids were associated with detrimental effects on injured workers with medical back conditions.

• The preponderance of evidence suggests that prolonged administration of opioids impedes, rather than facilitates, injured workers’ recovery from disabling back conditions.


Summary of Results

Exhibit 42


Analysis of Prescribing Patterns Schedule II Opioids

PBM and ICIS Data: • 16,890 Claims• 9,174 Prescribing physician DEA code• 233,276 Prescriptions• Script, dosage and days • Pharmaceutical characteristics • DOS, billed and paid amount• ER and EE characteristics

CWCI March 2011


Analysis of: 1. Injury Characteristics2. Physician Prescribing Patterns3. Injured Worker Characteristics

Exhibit 43


1.1%1.4%1.5%Other Diagnoses of Musculoskeletal Sys

1.5%1.7%1.2%Other Mental Disturb

1.6%2.7%6.3%Wound, FX of Shoulder, Arm, Knee or Lower Leg

2.8%3.2%6.8%Sprain of Shoulder, Arm, Knee or Lower Leg

2.7%3.6%6.0%Ruptured Tendon, Tendonitis, Myositis & Bursitis

6.8%5.9%5.5%Other Injuries, Poisonings & Toxic Effects

5.4%6.1%9.3%Degen, Infect & Metabol Joint Dis

6.5%6.8%5.0%Cranial & Peripheral Nerve Dis

16.1%15.1%11.3%Spine Disorders w/ Spinal Cord or Root Invlvmnt

50.2%47.1%35.7%Medical Back w/o Spinal Cord Invlvmnt

Pcnt of S-II Opioid Pymnts

Pcnt of S-II Opioid Scrips

Pcnt of S-II Opioid ClaimsDiagnostic Category

CWCI March 2011


Top Injury Categories w/ Schedule II Opioids

Exhibit 44




1.6%2.7%6.3%Wound, FX of Shoulder, Arm, Knee or Lower Leg


2.7%3.6%6.0%Ruptured Tendon, Tendonitis, Myositis & Bursitis




16.1%15.1%11.3%Spine Disorders w/ Spinal Cord or Root Invlvmnt


Pcnt of S-II Opioid Pymnts

Pcnt of S-II Opioid Scrips

Pcnt of S-II Opioid ClaimsDiagnostic Category

CWCI March 2011



Exhibit 45




1.6%2.7%6.3%

Wound, FX of Shoulder, Arm, Knee or Lower

Leg


2.7%3.6%6.0%

Ruptured Tendon, Tendonitis, Myositis &

Bursitis




16.1%15.1%11.3%

Spine Disorders w/ Spinal Cord or Root

Invlvmnt


Pcnt of S-II

Opioid Pymnts

Pcnt of S-II

Opioid Scrips

Pcnt of S-II

Opioid ClaimsDiagnostic Category

CWCI March 2011

•51% of Claims

•60% of S-II Prescriptions

•62% of Payments



Exhibit 46


Cumulative Percentage of Schedule II Prescriptions(Top 10% of S-II Prescribing Physicians)

79.2%77.3%75.2%72.7%69.7%66.0%

61.3%54.9%

46.2%

33.1%

0%

20%

40%

60%

80%

100%

Top1%

Top2%

Top3%

Top4%

Top5%

Top6%

Top7%

Top8%

Top9%

Top10%


CWCI March 2011

Exhibit 47


Cumulative Percentage of Schedule II Payments (Top 10% of S-II Prescribing Physicians)

88.2%86.8%85.1%83.1%80.1%

76.3%70.8%

64.7%

55.8%

42.4%

0%

20%

40%

60%

80%

100%

Top1%

Top2%

Top3%

Top4%

Top5%

Top6%

Top7%

Top8%

Top9%

Top10%

CWCI March 2011


Exhibit 48


7.46.6

7.88.4

11.0

8.69.1

10.911.0

15.5

0

5

10

15

20

Top1%

Top2%

Top3%

Top4%

Top5%

Top6%

Top7%

Top8%

Top9%

Top10%

Average S-II Opioid Scripts per Claim per MD(Top 10 % Prescribers)

CWCI March 2011


Median: 1.8

Exhibit 49


3.4

3.0

2.5

1.91.6

1.3 1.2 1.1 1.0

2.2

1

2

3

4

5

1st-10th

11th-20th

21st-30th

31st-40th

41st-50th

51st-60th

61st-70th

71st-80th

81st-90th

91st-100th

Average S-II Opioid Prescribing Physicians per Claim (Injured Worker)

CWCI March 2011


Median: 1.5

Exhibit 50


60.3

31.5

18.712.7

7.3 3.9 2.3 1.8 1.2 1.20

20

40

60

80

1st-10th

11th-20th

21st-30th

31st-40th

41st-50th

51st-60th

61st-70th

71st-80th

81st-90th

91st-100th

Average S-II Opioid Scripts per Claim(Injured Worker)

CWCI March 2011


Median: 5.9

Exhibit 51


• Rapid growth in S-II opioids use ;

• The top 3 percent S-II prescribing MDs account for: • More than half the S-II prescriptions, • 2 out of 3 morphine equivalents and payments;

• Top 10 percent of injured workers obtain scripts from 3.4 different physicians.

• Over half of S-II prescriptions are for minor back injuries that ACOEM describes as “typically not useful in the sub-acute and chronic phases.”

• Growing interest in state-wide and federal intervention.

Summary


Documents

California Orthopedic Association California …• Temp Disability • Perm Disability • Voc Rehab • Litigation D. Segment: Medical Services • Outpatient • Inpatient A. Segment: