Worker's Compensation PBMs, A New Standard for the Workers’ Comp Industry
STATEMENT OF THE PROBLEM
For many years, most Insurers, TPAs and Self-insureds relied on Group Health PBMs to manage their Workers’ Comp pharmacy programs. Considering that pharmacy bills represented only 10% of worker’s comp filings such a decision warranted little thought on the part of the companies or the PBMs. This lack of dedicated oversight cost companies plenty.
Of the $3-4 billion of pharmaceuticals that pass through Workers’ Comp, it is estimated that companies are overspending by an average of 33% or, in real dollars, $1.33+ billion a year! To make matters worse, that figure doesn’t include the administrative costs associated with managing the archaic and bureaucratic system. When a company adds up all these costs it doesn’t take long to realize that Workers’ Comp Pharmacy merits much closer attention.
In creating the Cypress Care system and process, the three main Workers’ Comp issues that plague most companies were addressed. These three main areas are:
- Low Utilization Levels
- Weak Compliance Measures
- Inefficient Information Management
Low Utilization Levels
Even when a PBM is in place, the industry averages less than 30% of injured workers utilizing the PBM’s program. This results is the creation of either a full retail bill for reimbursement from the injured worker or a premium bill from a Third Party Bill Payer, who guaranties payment to the pharmacy on behalf of the injured workers and Payer. In either case, not only does the Employer get saddled with unnecessarily high prescription prices but must also handle a paper bill, which creates unnecessary administrative work. With over 70% of all claims coming in the form of third party paper bills and the additional administrative costs incurred to handle them, it is not unusual for an additional $20+ for every pharmacy bill to be incurred.
In large insurance companies and TPAs, whole departments are being created just to manage this additional burden. In other cases, already overworked adjusters are trying to manage the overwhelming paper bill volume. The increased workload results in adjusters being constantly behind in their work, which results in delays, state fines, angry employees, aggressive lawyers and gross overspending.
Compliance
Most companies do not have customizable, strict formularies geared specifically toward work related injuries to ensure that each injured worker receives only compensable medicines (both in type and amount) for their injury. As a result, injured workers can take advantage of this lack of oversight and may not take the medication they need to get back to work in a timely manner. They are able to circumvent the system by using their major medical pharmacy card or paying cash and then turning in their receipts. There has been no way to institute a workable system of checks and balances to insure that companies are not paying for medication that is not related to a Worker’s Comp claim. For example, in one noteworthy case it was discovered that one patient was receiving over 800 Oxycontin pills per month and 200 Actiq lollipops – costing the Insurer over $14,000 per month. While an extreme case, it serves as a strong illustration of how easy it is for injured workers to take advantage of such a slack system.
Information Management
Since a patient’s health is on the line, decision-making should be made in real-time. Prior to Cypress Care, however, there was no true “Work Comp specific” built-in workflow processes in place. As a result, pharmacists, doctors and adjusters were wasting too much time on the phone attempting to accomplish what a robust software program could do instantly; Workers’ Comp Pharmacy Management was sputtering, costing billions of dollars per year in inefficient management.
Target Audience
When Cypress Care was formed, it set out to help all sizes of Insurers, TPAs, self-insured companies and employee benefit firms. The goals: Zealously contain pharmacy costs, maintain the strictest compliance standards, improve patient care and streamline Workers’ Comp Pharmacy benefit processing, management and payment.
The Birth of Cypress Care – The Objective
A PBM veteran, our founder, Lisa Datelle realized that most PBMs did not understand the intricacies of Workers’ Comp and attempted to institute the necessary changes at her employer in order to better serve clients. However, her ideas for strengthening the system fell on deaf ears. Her employer’s viewpoint was “Why push change when their clients weren’t asking for it and, more importantly, when the company was benefiting from the inefficiencies?”
Rather than accept the roadblocks, Ms. Datelle left her job and started Cypress Care with her brother, Marc Datelle, and their father, Hank Datelle, both Internet pioneers. Immediately, they saw the answers to Workers’ Comp inefficiencies were available through technology.
After months of due diligence and a year of development and beta testing, Cypress Care built SEQUIOIATM, a streamlined pharmacy management system built for mass customization. The software allows companies to tailor their Workers’ Comp Program specifically to their exact needs and enables them to proactively manage, track and monitor injured workers’ formularies which eliminates unnecessary paper bills, lightens the workload and reduces overspending - all at no additional cost.
As with many startup companies, Cypress Care was not seen as a threat to established PBMs. However, after competing with firms such as PMSI, Express Scripts, Corvel, First Script, MSC and HealthNet, Cypress Care completed a year-long RFP process with a National Workers Comp Insurer and won their business, hands down. The reason was simple. The National Workers Comp Insurer realized that Cypress Care had revolutionized Workers Comp pharmacy management.
Implementing SEQUIOIA for The National Workers Comp Insurer: One of the Largest Workers’ Comp Programs
The first step of implementation was to convert 35,000 open claims from all of the National Workers Comp Insurer’s offices into the SEQUIOIATM system. At the same time, Cypress Care worked to train the hundreds of adjusters who would now, at the click of a mouse, have all the injured workers’ data available to them and build customizable reports that would provide real-time ROI.[1] Once these tasks were accomplished, Cypress Care created customizable Coverage Lists for each patient.[2] Implementation was accomplished in less than 90 days and on March 14, 2004 the National Workers Comp Insurer was online and saving money.
Cypress Care began handling thousands of phone calls each day, receiving over 40,000 calls in the first month, alone. Even with that number of calls Cypress Care had less than a 3% error rate. This below-industry-average is attributed to the combination of the SEQUIOIATM software and the one-on-one contact each injured worker receives from a Cypress Care representative who explains coverage and answers inquiries about eligibility.
While the implementation/integration program was taking place, Cypress Care also implemented its Paper Bill EliminatorTM Program for the National Workers Comp Insurer. By completely outsourcing its paper bill processing (as many as 1000 bills per day) to Cypress Care, the National Workers Comp Insurer not only started saving $22 per bill, it was able to completely eliminate a department formed just to manage the paper bill process internally. Today, the National Workers Comp Insurer adjusters need only to forward the bills to Cypress Care who, using their pharmacy network of over 55,000 members, then lowers the bills to CCRx (the Cypress Care Pharmacy Program) rates and engage with the injured worker to utilize the new program going forward.
RESULTS
For the National Workers Comp Insurer, injured workers are receiving much better attention and care, while the Company has significantly increased profits to their shareholders.
- We manage Workers Compensation pharmacy claims for the National Workers Comp Insurer’s 3500 client companies, taking care of nearly 35,000 injured workers.
- The National Workers Comp Insurer went from 40% Utilization in 2003 (using a Group Health PBM) to 82% Utilization under Cypress Care.
- The industry average for brand/generic ratio of scripts filled in the Workers’ Comp industry is approximately 60/40.
- Cypress Care converted 92% of all brand scripts to generic – when a generic was available.
- As a result, Cypress Care achieves the reverse ratio: Generic – 60%, Brand – 40%.
- Cypress Care’s strict compliance measures resulted in rejecting 24% of all scripts (a 14% increase over the industry average), resulting in additional savings.
- In 2004, the National Workers Comp Insurer has saved, in real dollars, nearly $25mm (in only 9 months). Importantly, that figure does not take into account the millions of dollars saved in administrative efficiencies. For example, not only did the National Workers Comp Insurer’s adjusters become remarkably more efficient, in one instance, Cypress Care’s services eliminated the need for an entire department, altogether.
In Summary
By carefully studying the inefficiencies in the PBM system for Workers’ Comp, Cypress Care has not only raised the bar for its clients, but has forced all other PBMs in the industry to completely change their business model. As a result, with Cypress Care leading the way, PBMs are now removing all the inefficiencies that have plagued Workers’ Comp for decades.
1 The head of pharmacy for the National Workers Comp Insurer, would get reports from her former PBM that were hundreds of pages long, and had data everywhere. She couldn’t read them and it took hours out of her day to try to figure them out. Even worse, she would get these reports every month and they were never consistent.
[2]Coverage List – all of our competition have a coverage list, but most of them have a default coverage list, which is what The National Workers Comp Insurer had before Cypress Care. But, Cypress Care can customize it down to the patient level. Other companies can do this too, but it’s the fact the Cypress Care takes the time to actually do it upfront – as part and parcel of its overall service offering.