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 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. Kate Berger Beth Hargarten Marlana Nierengarten Jamie Anderson

MSRB members excused:

Staff members present:

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. VelascoThompson 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 taskforce 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