State of Minnesota

Medical Services Review Board

July 15, 2004
443 Lafayette Road N.
St. Paul, MN

MSRB members present: Beth Baker, M.D., chairperson

Philip Bachman, M.D.
Barbara Baum
Sharon Ellis
Michael Goertz, M.D.
Charles Hipp, M.D.
Gregory Hynan, D.C.
William Martin
Robin Peterson
Jon Talsness, M.D.
Andrea Trimble Hart
Ellen Velasco-Thompson

MSRB members excused: Lynn Ayers

Jeffrey Bonsell, D.C.
Chad Hendricksen, D.C.
Gregory Hynan, D.C.
Michael McGrail Jr., M.D.
Debra Olson
Andrew Schmidt, M.D.
Bruce Van Dyne, M.D.

Staff members present: Kate Berger

Beth Hargarten
Marlana Nierengarten
Jamie Anderson

Others present:

David Miller , Fairview Pharmacy Services

Brian Hicks, Medical Advanced Pain Specialist
Judy Hawley, American Physical Therapy Association, Minnesota Chapter
Erin Sexton, Minnesota Medical Association, Minnesota Orthopedic Society

1. Call to order, introductions, announcements

Chairperson Baker called the meeting to order at 4:07 p.m. Members introduced themselves to the group.

2. Approval of minutes – Action item

There were no minutes to approve.

3. Assistant commissioner’s update

Assistant Commissioner Hargarten presented an update of workers' compensation issues from the past
legislative session. The main legislation, based on findings of the medical task-force, did not become law. It went
through 10 committees, but never received a floor vote. This is the second year in a row that proposed legislation has
not become law. This has brought about questions concerning the future of the Workers' Compensation Advisory
Council (WCAC). Commissioner Brener has had talks with Ray Waldron of the AFL-CIO and David Olson from the
Minnesota Chamber of Commerce. Early indications show the WCAC will continue through the next legislative
session. In the meantime, the commissioner wants to pursue changes via rulemaking for the areas of pharmacy costs
and managed care. While rulemaking is not as efficient as legislation, the two aforementioned areas seem the most
likely to be resolved through this process. The Department of Labor and Industry has already sent board members a
copy of the Request for Comments.

4. Discussion of proposed pharmacy and managed care rules

Dr. Baker began the discussion with a question about the status of changing treatment parameters through
rulemaking. Hargarten explained expedited rulemaking was part of the legislation that did not pass. If we tried to do
this without the legislative change, dealing with such a large issue would take at least two years and be very costly.

Baker asked about possible legislation for next year. According to Hargarten, there is no indication of WCAC
plans including a final decision about whether they will still be in existence. Their next meeting, Aug. 4, 2004, may
answer this question. Most likely, we will not know the specifics until next February or March.

Dr. Bonsell asked why the council is in jeopardy. Hargarten replied that this is the second year in a row that its
proposed legislation did not pass. Although state law mandates the existence of the council, there is no directive that
the Legislature must follow its recommendations. In the past, the Legislature has viewed the council as the legitimate
venue for legislative change and deferred to its proposals. The reason for the change may be the number of new
members who do not remember the workers' compensation "wars" of the 1990s. They may not realize how divisive
this issue can be. If the council disbands, it would drastically change the way the department presents legislation. She
also stated this would be a huge blow to workers' compensation and the people the system serves.

After this, Barbara Baum asked if there were plans to bring a medical component to the council. Hargarten
responded that the Legislature deliberately limited the involved parties. Because labor and business were the parties
involved in giving up rights by establishing the workers' compensation laws, they should be the ones at the table.

Bachman requested information about the comment period for the proposed rules about managed care and
pharmacy fees. Hargarten informed him comments are accepted for 30 days after the formal notice. Kate Berger
added that the Request for Comment process alerts people a new rule is coming and elicits comments at the
beginning, but is not the formal notice that starts the 30-day comment period. She informed the board the notices
are listed on the Department of Labor and Industry Web site. The main workers' compensation page has a link to
Request for Comments; from there, visitors choose the link to “Medical issues.”

Baker commented the pharmacy rules are similar to this year's proposed legislation. Berger clarified this by
pointing out the section of the handout labeled “Revisor of statutes” is the existing rule. The first page of the handout
shows proposed changes to the rule. The department's proposed recommendations to the medical task-force last fall
include setting the maximum pharmacy fee at 86 percent of the average wholesale price (AWP), plus a dispensing fee.

Hargarten also pointed out the rest of the handout consists of selected pages from the task-force report that
pertain to pharmacy costs and managed care. She also called attention to the list of issues shown at the beginning of
the report. The issue of treatment parameters as it pertains to pharmaceuticals may be an issue for future discussion.
Both Baker and Ellen Velasco-Thompson expressed the need to look at treatment parameters for narcotics.

Bachman questioned whether the proposed rules dealt with the issue of changing drugs within the same class.
According to Berger, existing law already requires substitution of generics. Hargarten reiterated that, for now,
rulemaking is limited to pharmacy costs.

Because the board had not met since April, Baker felt the need to convene this meeting even without new
legislation. She noted there is no permanent decision regarding future plans. The board members need an update of
where they are in the process. She concluded the pharmacy associations would have an impact on the new rules.

While there is not a designated pharmacy member on the board, Hargarten noted they were welcome to speak to
the group or make comments about the proposed rule changes. She also added they had been active with the task force
and had not opposed the proposed legislation.

Next, Baker introduced the issue of negotiated fees in managed care. Barbara Baum wondered if this might set a
precedent for other groups to negotiate fees and jeopardize the fee schedule. Hargarten replied that the law is very
specific and currently prohibits only managed care organizations from negotiating fees. She believes many
noncertified managed care organizations are already doing this.

After this, Hargarten answered Bachman's question about managed care. If new rules were implemented, how
would we measure their success in reducing business costs? According to Hargarten, this issue goes back to 1995.
While there are no guarantees, it seems likely the business community would demand lower insurance costs.
Reducing workers' compensation costs is the primary goal of Commissioner Brener. In response, Bachman said he
believed only the largest insurance companies would survive. This would result in less competition and probably
diminish the cost savings passed on to employers. He acknowledged that workers' compensation is reimbursed at a
higher rate than any other system. However, it also has more administrative costs than other programs. Velasco-
Thompson stated from her experience most providers charge more than the maximum allowable fee. Hargarten
responded that even if a provider charges more, it won't be paid more than the fee schedule allows. She added that
while she didn't discount the burden of administrative costs, she did not feel this is an issue to the degree that it would
justify the higher costs. Evidence from the legislative process indicates associations pass cuts in other areas, such as
Medicare, to workers' compensation. While Sharon Ellis said she had seen this happen, Dr. Goertz questioned the
statement because he has seen erosion in costs for office visits. Hargarten encouraged board members to read the task-
force report on the Department of Labor and Industry Web site. This contains data and statistics, plus information
from people who participated in task-force discussions. She clarified that the data used was from 2002. Available data
typically lags about two years behind. Even so, the last two available years worth of data has shown increased costs.

In recent years, the number of managed care providers has decreased from 11 to four. Velasco-Thompson
observed that many employers have changed to preferred provider organizations (PPOs) or an alterative. In view of
this decline, Ellis questioned whether managed care reform was the best way to spend the board's time. Hargarten
explained that the rulemaking process is costly and lengthy. Department budget cuts preclude the board from working
on more complex issues through rulemaking. Managed care and pharmacy costs appear to be areas where the board
could accomplish the most in a limited amount of time. She assured board members they would receive updates about
draft language via e-mail.

5. Meeting schedule

The next meeting was changed from Oct. 21 to Oct. 14, 2004. This was done to accommodate members who
had a conflict due to MEA.
6. New business

There was no new business.

7. Old business

There was no old business.

8. Adjourn – Action item

Bachman made a motion to adjourn the meeting. The floor seconded the motion. The motion was carried; the
meeting was adjourned at 5:10 p.m.

Respectfully submitted,
Marlana Nierengarten
Executive Secretary