The Cost Drivers: Emergent Medical Issues Facing Workers’ Comp in Louisiana, featuring John Kocke of AMC Resources, Inc.

NCCI recently reported that claim-related medical expenses now account for sixty percent of workers’ compensation costs overall and they are predicting at least another ten percent increase by 2016. Further, their most recent research report on prescription drugs finds that prescription costs per claim continue to grow and that narcotics now account for a full quarter of total drug costs in workers’ comp claims. Utilization (rather than total cost or price change) and physician-dispensing of prescription drugs continue to increase in significance as major cost-drivers.

In Louisiana, our concerns (especially as they relate to the implementation of the Louisiana Medical Treatment Guidelines) shift and change with the national tides but differ in key respects. To get a hard-hitting report on the emergent medical issues that are affecting workers’ compensation here at home, Louisiana Comp Blog spoke with John Kocke, RN, BS, CCM, CLCP, founder of AMC Resources, Inc. AMC Resources Inc. is a medical case management company that assists insurers and their adjusters with cost control in several areas including: utilization management, vocational rehabilitation, medical bill review, litigation assistance and Medicare set-asides. What follows are the top three factors Kocke identified in response to our key question: What’s Driving Costs Today?

Factor #1: Physician Dispensing

The in-house physician dispensing of repackaged prescription medications is one of the primary aspects of rising medical expenses for individual claims. This practice, especially common in the oft-maligned pain management clinics spread across the state, constitutes one form of what Kocke calls “passive income” among doctors who try to “game the system.” It is hard to deny that the practice is predatory, beyond just being a cost-driver, when ones sees the billing difference on an individual level. According to Kocke, AMC will typically see charges by third party billers that are up to ten times the retail price of the drug. In one extreme case, a third party biller for a physician charged nearly $2,100 for a 90 day supply of the anti-inflammatory medication meloxicam, (brand name Mobic). The average retail price at local pharmacies for a 90 day supply of this medication is a mere $85.

Factor #2: Drug Testing

Historically, drug testing in Louisiana workers’ compensation has been used in the post-accident setting to determine if an injured worker may have been impaired at the time of their accident. A positive drug test for either an illegal drug, such as THC or Cocaine, or a non-prescribed legal medication, like Xanax or Vicodin, could be grounds to deny benefits to the claimant. This post-accident test is usually performed using a five or ten panel urine dipstick that identifies certain classes of drugs.

Until a few years ago pain management physicians utilized the same five or ten panel dipstick to drug test their patients. Kocke explains, “If the patient is taking their medication then they should be positive for that class of medication. If they are not positive then the question becomes: what are they doing with the medication?” This simple test was also able to determine if a patient was positive for non-prescribed medication or illegal drugs. All of these factors are important to the physician for the treatment of the patient and to the carrier who is being billed for the physician’s services.

Louisiana law stipulates that a dipstick drug test is billed with the CPT code of 80101, with a reimbursement allowance of $65. Kocke explains the situation as follows: “The physician would charge the carrier with a one dipstick test, which is a very reasonable and desirable part of the treatment plan. This all worked smoothly until a few years ago, when we started seeing drug testing bills from pain management physicians ranging anywhere from $750.00 to as high as $5,000.”

What happened, according to Kocke, is that certain labs began marketing to physicians, encouraging them to incorporate drug testing equipment designed for them to charge up to one 80101 (with the same reimbursement allowance of $65) for each class of drug they tested. Thus, instead of using a dipstick to test for all classes of medication, the urine is poured into multiple test tubes and each one counts as its own unit for testing and charging.

However, multiple charges are only part of the testing structure. Kocke explains, “To top it off, many doctors would then send everything to the lab for a ‘confirmation’ test and the carrier would receive a second bill for about the same amount that the physician billed. Many of these physicians performed these drug tests on a monthly basis, while some only quarterly. In the last year or two, this type of drug testing has spread beyond pain management physicians to some orthopedic clinics.”

One such confirmation lab is Veritas Laboratories LLC, based out of South Georgia. Their website characterizes the company as follows: “Veritas Laboratories is an independent toxicology laboratory specializing in medication monitoring and drug detection services…Our process, from the matrices used in testing to the final laboratory report, was created after consulting with several pain management physicians.” The site also notes: “Your sales representative handles ordering the initial set of supplies and will handle re-ordering supplies for oral fluid and urine specimen testing as needed.” This profitable relationship between the physician (who contributes nothing in up-front costs for testing supplies or installation) and labs such as Veritas has received much attention recently in the comp community. Joseph Paduda, of Managed Care Matters, spoke about these concerns at the 2014 NCCI Annual Issues Symposium. His presentation, entitled “Reforming the Delivery of Workers’ Compensation Medical Benefits: Something the Affordable Care Act Can’t Do,” included a gleeful email from Jonathan Daitch, MD (pictured below in full) in which Daitch states that: “Veritas has an economic model where they do the Urine Screens and Confirmations, and YOU get paid for NON-GOVERNMENTAL (commercial) urine revenue!!!” (original text).

Kocke admits that there is some value in qualitative testing for certain patients; but the unintended consequences of Louisiana’s twenty-year-old fee schedule have allowed both physicians and labs to “take serious advantage of the situation to reap huge passive profits.” In neighboring states reimbursement rates for these tests are in the range of $250 to $350.

daitch letter

Factor #3: Outpatient Injections

The final key factor (also within the realm of pain management) is outpatient injections, which comp carriers have ominously dubbed the “black hole of pain management.” Kocke identifies this last element as another source of rapidly increasing costs and an added opportunity for medical practitioners and facilities to capitalize on Louisiana’s outdated fee schedule.

In Kocke’s view, with twenty-two years of medical case management experience behind him, the move toward outpatient procedures has become more prominent directly in response to the schedule, which sets reimbursement for outpatient procedures at ninety percent and inpatient procedures at per diem or outlier rates. He explains: “For epidural injections I’ve seen bills as high as $15,000 for two or three ‘sticks’ with recovery room fees of up to $3,500. Under normal circumstances, there is very little recovery to speak of. This is another example of medical providers taking advantage of our outdated system.”

According to Kocke, in the era prior to the treatment guidelines, the prevalence of various types of pain management injections (most of which included steroids) was even greater than it is now. Years ago, he was involved in several cases where the patients had undergone long-term treatment with steroid injections and eventually developed avascular necrosis of the hip, requiring total hip replacement. Ultimately, the carriers were compelled to pay for these procedures because they occurred as part of the treatment for the comp injury. He has also had claimants who suffered from other major side effects of steroid injections, including blood clots. One such case involved a claimant who “threw” a clot that traveled to her lungs causing a pulmonary embolism, which eventually led to permanent lung and heart damage.

Additional Key Issue: Co-morbidities

Louisiana’s workers’ compensation industry, like many other states across the country, suffers from rising medical costs due to poor patient health and co-morbid conditions. Kocke cites type-2 diabetes, obesity and cardiovascular disease as the primary culprits, and the “big three” have a way of creeping into a wide variety of claims. NCCI’s 2010 report on obesity and risk of injury, as well as claim costs, supports Kocke’s position. The study concluded that: “there are systemic differences in the outcomes for obese and non-obese claimants with comparable demographic characteristics” and that “there is greater risk that injuries will create permanent disabilities if the injured worker is obese.” Further, NCCI’s 2012 study on co-morbidities in workers’ compensation found that: “The share of workers’ compensation claims with a co-morbidity diagnosis nearly tripled from Accident Year 2000 to Accident Year 2009, growing from a share of 2.4% to 6.6%” and rising. However, with the new 2013 AMA re-classification of obesity as a disease and potential disability, insurers and employers may be able to obtain reimbursement from Louisiana’s Second Injury Fund, if a worker’s obesity merges with an on-the-job injury. With the latest CDC estimates pegging the Louisiana adult obesity rate among the highest in the nation at 34.7%, baseline employee health and claim costs increasingly go hand in hand.

Ultimately, Kocke remains cautious about the future, but predicts positive changes on the horizon based on recent developments in the industry: “From a medical perspective, the treatment guidelines are the biggest step forward we’ve had in Louisiana ever, [but] we are a very litigious state.” As awareness of key factors like these rise, the end goal of appropriate and cost-effective patient care for Louisiana’s injured workers will hopefully become a consistent reality.


About the Commentator:

John Kocke is the founder of AMC Resources Inc., a medical case management company located in Mandeville. AMC Resources has been around since 1992 and offers services in: medical case management, utilization management, vocational rehabilitation, medical bill review, litigation assistance, life care planning, future medical cost projection, and Medicare set-asides. Kocke is also an instructor for LASIE’s Certified Workers’ Compensation Professional (CWCP) program, LSU School of Nursing’s Legal Nurse Consultant course, University of South Alabama’s Legal Nurse Consultant course, and a frequent expert witness on utilization matters. Kocke has years of clinical nursing experience and is currently pursuing his Master of Nursing degree from Loyola University of New Orleans, set to graduate December 2015.


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