UR Nation End of Month Regulatory News Summary

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announcement-updated_4-1-15
Division of Federal Employees Compensation Taking New Stand Against Compounding

The Dept. of Labor, Division of Federal Employees’ Compensation (DFEC) has announced that it will implement a new compound medication policy in October, 2016. Given the sharp increase in the utilization and cost of compound medications over the past few years, DFEC will soon require injured workers’ treating physicians to complete a Certification/Letter of Medical Necessity prior to authorization of any compound medication. As part of the new policy, authorizations will allow for only a 90-day supply, and refills will only be issued in 30-day supplies.

While DFEC acknowledges that compounded drugs may be appropriate for a small number of patients who have special circumstances, compounded drugs may not be subject to rigorous safety and efficacy testing, may have ingredients not approved by the FDA and may have excessive costs. In addition, DFEC also believes there is credible evidence that some compounding pharmacies have engaged in fraudulent practices that have both endangered patients and raised the costs of health care to the public. For example, DFEC is aware that the Department of Labor, Office of Inspector General, has executed federal search warrants on several compounding pharmacies in connection with fraud allegations.

The Intensity is Picking Up in the Fight over ColoradoCare

Ralph Ogden, a former workers’ comp attorney, said in his op-ed, published in the Denver News, that ColoradoCare would improve care to injured workers because medical providers would be paid the same as they are for treating other injuries that aren’t related to work. The initiative would also help employers by slashing the cost of workers’ comp insurance. Ogden argues that since 59 percent of workers’ comp spending goes to medical treatment, employers should see a 59 percent reduction in their workers’ comp costs. Ogden said that, for example, Pinnacol’s 2015 annual report shows that it collected $615,733,000 in premiums last year. If ColoradoCare passes, Pinnacol should charge $363,282,470 less.  While that may be bad for Pinnacol, that’s good news for Colorado businesses.

In an interesting turn of events, it appears that support for ColoradoCare is losing steam. In June, 2016 Magellan Strategies conducted a poll in which 51 percent approved of ColoradoCare, and 43 percent disapproved. But more recently, Magellan conducted a poll at the end of August which showed 65 percent of the polled voters now oppose the measure.

FDA to Require Stronger Warnings on Mixing Opiods and Sedatives

As a part of the Opioid Action Plan, the FDA will require boxed warnings for nearly 400 opioid and benzodiazepine products (benzodiazepines are sedatives like Xanax and Valium). The FDA said that its actions follow an extensive review of the recent evidence that shows physicians have been increasingly prescribing opioid painkillers and benzodiazepines. The FDA’s research has shown that combining the two types of drugs often causes adverse outcomes. The risks associated with combining opioids and benzodiazepines include extreme sleepiness, respiratory problems, coma and death. The FDA said that the number of patients who were prescribed both an opioid and benzodiazepine increased by 41 percent from 2002 to 2014. This translates to an increase of 2.5 million people who have received both an opioid and a benzodiazepine over that time period.

FDA Has Scheduled Public Hearings Regarding Off-Label Drug Marketing

The FDA has scheduled public meetings on November 9 and 10 to gather input on the issue of off label drug marketing. Currently, doctors are allowed to prescribe drugs “off label,” meaning the drug has received FDA approval, but not for the specific condition being treated. In this instance, drug companies are not allowed to market the drugs for off label use.

For example, Neurontin is FDA approved for the treatment of epilepsy. But it is not FDA approved for treating neuropathic pain, which can arise from nerve damage. But the ODG guides say that Neurontin is regarded as a first-line therapy for neuropathic pain. So in this situation, the drug maker cannot market Neurontin for neuropathic pain even though it is approved by ODG.

The FDA essentially wants to hear about the potential benefits and drawbacks of drug companies being able to market or provide information to doctors on off-label use. Another question is whether it’s appropriate for the companies to share the information with patients. For example, how can the FDA monitor drug makers’ communications about off label uses of their medical products, and what actions should the agency take if the communications are found to be false or misleading?

A common sense question many stakeholders may ask the FDA is if an off label treatment such as Neurontin is recommended by ODG or ACOEM, why wouldn’t that be fast tracked for FDA approval? This is as opposed to allowing drug companies to market off-label, which could invite abuse.

Opt Out Employers Have 90 Days to Get Work Comp Coverage

The Oklahoma Employee Injury Benefit Act, i.e. “Opt Out” act of 2013, provides that in case the statute is ever declared unconstitutional employers will have 90 days to obtain work comp coverage after the Supreme Court of Oklahoma issues its “mandate” per Supreme Court Rule 1.16. It is unclear when the Supreme Court of Oklahoma will issue its mandate. However, most legal experts believe the mandate (which appears to simply be an order of the court) will come down in a few weeks.

The good news is that the 54 employers in Oklahoma who have opted out have been preparing for this contingency for months. The 54 companies include Dillard’s, Big Lots, Res-Care, Inc., Cabela’s Wholesale Inc., and Brookhaven Hospital.   Bill Minick, president of PartnerSource, which sells alterative Opt Out plans, said “We’ve heard trial lawyers and workers’ comp insurance companies who would love to paint a picture of disarray, but the fact is we’ve been planning for this possibility for months. And we’re now working on well defined transition and contingency plans. They say there’s nothing but chaos and failure, but the exact opposite is true.”

All workers’ comp system participants should keep in mind that the Supreme Court of Oklahoma, having found the entire Opt Out act unconstitutional, does not have to follow the 90-day rule provided in the statute. For example, they could rule that because the Opt Out plan poses a danger to existing workers caught in the plan, employers will have 30 days to get coverage, and all existing Opt Out claims will immediately be transferred to the Oklahoma Workers’ Comp system. Obviously, for the 54 employers who opted out, the Oklahoma legislature, and those Opt Out system participants, Opt Out has been a debacle.

Study by John Hopkins Shows 2,000 percent Markup Common Among Hospitals

A report by John Hopkins shows that some hospitals are setting prices for some services at more than 20 times their actual cost. The report will appear in the September issue of Health Affairs and uses data from 2013 from all Medicare-certified hospitals with more than 50 beds.

Dr. Gerard Anderson, a researcher at the John Hopkins Bloomberg School of Public Health, said “We realize that any policy proposal to limit hospital markups would face a very strong challenge from the hospital lobby. But we believe the markup should be held to a point that’s fair to all concerned – hospitals, insurers and patients alike.”

According to the report, hospitals with strong market power, either through systems affiliations or by dominating a regional market, were more likely to set high markups.  The report showed that government-run hospitals had the lowest average markup at 3.47, while nonprofit hospitals were at 3.79, with the highest markups seen by for-profit hospitals at 6.31.  So for example, if a service costs the for-profit hospital $100, they would charge the patient $631.00.

Supreme Court of California has Declined to Hear CHP v. WCAB

The Supreme Court of California has declined to hear CHP v. WCAB. In the case of CHP v. WCAB the 2nd District Court of Appeal ruled that when Maximus fails to timely render its decision on an IMR the decision is still valid. As many in the industry know, many IMRs are issued beyond the 30-day requirement of LC 4610.6(d). When this happens, applicant attorneys generally believe a case is “defective” and should go to the WCAB where a workers’ comp judge will make the medical determination. Employers and their carriers generally believe IMRs, even if rendered beyond the 30 day window, are still valid. They point out that nothing in the labor code states that an IMR decision, if rendered beyond 30 days, makes it invalid. The statute is “directory” but does not say failure to comply results in invalidity. The 2nd District Court of Appeal agreed that a late response does not invalidate the medical determination, and this is now the law given that the Supreme Court of California has declined to hear this case.

Gov. Jerry Brown Signed CA SB 1160

As many of you know, the Senate voted 35-3 to pass SB 1160. As reported previously, the interesting thing about SB 1160 is that it was originally a bill (pushed by Sen. Tony Mendoza) that called for the administrative director to oversee an accreditation process for UR companies doing business in CA. But then it morphed into a bill (pushed by DIR Director Christine Baker) that prohibited UR in the first 30 days if certain conditions were met. So starting in 2018 there will be no UR in the first 30 days of injury (if in an MPN) if services rendered are consistent with MTUS. Pharmaceuticals, non-emergency surgery, psychological treatment, home health care, imaging and radiology, DME more than $250, and electrodiagnostic medicine will still require UR. Also, the administrative director shall designate URAC as the accrediting organization for UROs until other specific criteria is adopted, if ever.

Tom Swiatek

Tom Swiatek

As Assistant Vice President of Regulatory Services, General Counsel, and Editor in Chief of UR Nation, Tom Swiatek draws on his experience as an insurance attorney on both the general liability side, as well as on workers’ compensation matters. As a California Workers’ Compensation Section Member, Tom is leading the discussion with respect to the regulatory challenges and opportunities facing the workers’ compensation system.