Workers’ Compensation Advisory Council Dec.

10, 2003 Minutes
Voting members: Paul Bailey Stan Daniels Wayne Ellefson Mike Hickey David Olson Reed Pollack Brad Robinson Julie Schnell Gary Thaden Brad Lehto (For Ray Waldron) Voting members absent: James Cavanaugh Glen Johnson Nonvoting members: Rep. Dan Dorman Sen. Linda Higgins Sen. Geoff Michel Rep. Joe Mullery Staff: Jamie Anderson Scott Brener Debbie Caswell Jim Feckey Beth Hargarten Keith Keesling Terry Mueller Visitors: Barbara Baum; MN PTA Ray Bohn; WCRA Greg Coon; Grinnell Mutual Judy Hawley; MN Chp-Amer PTA Steve Hollander; MARP Tom Hesse; Minnesota Chamber Todd Johnson; WCRA Bert McKasy; Lindquist & Vennum Larry Koll; Koll, Morrison Tom Lehman; MHA Matthew Lemke; Winthrop & Weinstine Bob Lund; State Fund Mutual Tammy Lohmann; Commerce Andy Morrison; Koll, Morrison Mark Pixler; MAPS Joanne Schweche; Western National Erin Sexton; MMA and MN Ortho Society Lonne Smith; RTW Sarah Strong; CHG Bev Turner; The St. Paul Companies Bob Weeks; MN Occupational Health John Whisney; Nowcare

The meeting was called to order at 9:42 a.m. by chairman Scott Brener. Commissioner Brener announced that, due to an aggressive agenda at this meeting, the religious exemption issue would be postponed until the next meeting. Language drafted by Omar Syed from the Attorney General’s office was in members’ meeting packets and Brener asked members to review it and get back to DLI with any comments before the next meeting date. Brener introduced Jamie Anderson as the newest member of his cabinet. She will handle the department’s lobby activities at the capitol. She was the committee administrator in the House of Representatives for Rep. Bob Gunther’s Finance Committee. Anderson will work as an attorney in the department’s Legal Services unit in the off season. Grace Schwab left the department and accepted a position at the Minnesota School Board Association as a lobbyist.

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Steve Hollander was not yet available so agenda item IV. B. Filing deadline for retraining plans was delayed until later in the meeting. IV. D. Medical Costs Task-force recommendation Brener reviewed a summary version of what was discussed at the Medical Costs Task-force meetings. Copies of his presentation were available at the meeting and online at http://www.doli.state.mn.us/pdf/mctf_wcacsum.pdf. Brener noted the Legislature asked the Department of Labor and Industry (DLI) to put together a task force representing various groups in the workers’ compensation system to look at medical cost issues within that system. The task force consisted of three employee representatives, three employer representatives, three representatives from the health care community, one hospital administrator, one pharmacist representative, one insurance corporate representative and Brener. The task force met on seven occasions and focused its discussion on five principal areas. Those issues were pharmaceutical costs, managed care, hospital costs, health care provider costs and utilization. They finished the process last week. DLI is currently putting together a booklet to reflect what was discussed in more detail and how parties reacted to a variety of recommendations the department developed. Brener expected to have that report available at the next meeting. Brener noted Reed Pollack served on that task force and has some first-hand recollection of what happened. Brenner began his presentation and noted we started with the year 1993, because there was fairly significant workers’ compensation legislation at that time that mandated certain changes to the workers’ compensation system. Initially, we saw the average cost for claims decline, but then they started rising again. In 1993, the average charge for claims hit a historical high of $1,589.32. By 2002, we were paying approximately twice what we were paying on the medical side of the equation in 1993. Some of this cost inflation is attributable to the fact that we have a medical fee schedule in place, with a conversion factor that determines what we pay health care providers. That fee schedule escalates at an annual rate up to the statewide average weekly wage. That is not the whole story, so we looked beyond the medical fee schedule at the increasing costs of services, the increasing number of services and the changing mix of services. This led to the five principal areas the task force looked at. See the handout for details from the presentation about what information was reviewed by the task force. The department’s recommendations 1 through 18 are on pages 12 through 42 of the presentation packet. Brener clarified that some of the department’s original recommendations were altered based upon input from the task force. This is noted by a circle around those recommendations on the presentation. [Indicated with an asterisk in this document.] 1)* 2) Set maximum allowable fee for medications at MAC + $3.65; or 86 percent AWP + $3.65, if no MAC price. Allow an employer/insurer to contract with and negotiate rates with a pharmacy network from which the injured employee must select a pharmacy to fill prescriptions. Mileage parameters would be included to ensure reasonable access.

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3)* 4)

5) 6) 7)* 8)* 9)*

10)*

11)

12)* 13) 14)

15)

16)

Require pharmacy benefit managers to disclose to employers/insurers any rebates. The workers’ compensation treatment parameters be amended to provide: • prescribing parameters for certain classes of drugs (such as use of narcotics for musculoskeletal pain); and • time and quantity parameters for the use of selected drugs for specific conditions (such as NSAIDs for initial treatment of musculoskeletal injuries). Allow managed care plans to negotiate fees with participating providers. Make peer review, utilization review, case management and dispute resolution optional features of certified managed care. Redefine when there is a prior treating relationship. Require the employee to use the plan’s designated provider for the first 14 days. Eliminate large vs. small distinction; separate out critical access hospitals for different reimbursement. Pay noncritical access hospitals at the average payment-to-charge ratio for all hospitals plus 15 percent (i.e. 53 percent + 15 percent = 68 percent). Adjust reimbursement rate annually with updated data from the Department of Health. Pay critical access hospital patient services at 100 percent usual and customary. Pay all other services at: • fee schedule + 15, if it applies; • otherwise, at average payment-to-charge ratio for all hospitals plus 30 percent (i.e. 83 percent). The appropriate inflator for the conversion factor is the PPI-P. Cut the CF to what it would have been had the PPI-P been used when available: $62.68; and in the future adjust by PPI-P. Pay nonhospital services not covered by the fee schedule at 68 percent of usual and customary. Allow the employer to select the initial health care provider for the first 14 days of treatment. Add to the statutory definition of “reasonably required treatment”: • “as defined by any applicable treatment parameter”; • that treatment exceeding a parameter is presumed to be “not reasonably required”; and • presumption is rebuttable by clear and convincing medical evidence that a reason for departure exists. Require judges and payers to apply the parameters: • Payers must cite parameters in denials of “unreasonable” treatment. • Fact finders must make decisions based on parameters. • If the parameter was not used, the fact finder must explain why. Authorize the department to use “expedited” rulemaking to update and extend parameters: • with legal standard that parameter must reflect evidence-based medical practice; and

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17) 18)

be developed in consultation with the MSRB (DLI will work with the MSRB to streamline the parameter development process). Amend the statute to limit physical medicine modalities and procedures to 24 visits per injury. Amend the statute to define any technology not approved by the FDA prior to the date of enactment as “not reasonably required,” unless approved for use by the commissioner in consultation with the MSRB.

Paul Bailey noted doctors often prescribe 45 pills when you might only need 20. He asked if anyone has considered that as an option. Brener said the task force looked at that issue and their response to that was we need to develop some treatment parameters as medical guidelines to specifically look at the three most heavily prescribed classes of drugs in the workers’ compensation system. Those are the narcotics, the anti-inflammatories and the muscle relaxants. He noted there would be exceptions to those treatment parameters as they exist in current law as well, but those would be best practices guidelines that generally would need to be followed. As manufacturer’s wholesale prices increase, fee schedules based on the measure will rise proportionately. This is the consumer price index for prescription drugs. The price of drugs, in general, has increased and this goes to Paul’s point. New drugs are always more expensive and tend to drive up average costs, so we need to focus on developing treatment parameters that look at that. Linda Higgins asked for information about the difference in what it would cost large hospitals if they were to receive 100 percent reimbursement versus 85 percent reimbursement. Brener noted he did not have the information currently available. Higgins noted some of those hospitals are currently the most stressed. Brener reviewed the department’s cost-control options. This information tells you what happens to system costs by doing a variety of things he spoke of today. If we eliminate the scaling factors so all providers are paid at the same conversion-factor level, we would be increasing medical costs at 3.3 percent and workers’ compensation system costs at 1.2 percent. If we pay noncritical access hospitals at 68 percent, which is principally 85 percent, we would decrease medical costs to 9.1 percent and system costs to 3.3 percent. If we make the changes to the critical access hospitals, we would decrease medical costs at a little more than 3 percent and system costs a 1.2 percent. If we cut the conversion factor to what is approximately 170 percent of the level in 2004, we would decrease workers’ compensation medical costs about 5.4 percent and system costs about 2 percent. If hospital services not covered by the fee schedule were paid at 68 percent, versus the 85 percent, which they are generally paid at, we cut medical costs by 4.7 percent and system costs by 1.7 percent. The cost implications are outlined on pages 43 through 45 of the presentation packet. Brener again mentioned the department will have a packet bound and ready to go for WCAC members by the next meeting so they can “dive a little deeper,” but he wanted to give them a taste of where the debate was and where the issues were focused. He also wanted to allow time over the holidays to review the information. Pollack shared what he experienced as a member of the Medical Costs Task-force. He noted this was the most polarized group he ever met. The hospital and health care providers

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do not see a problem and do not believe medical costs are excessive. The employers and payers of the system see a problem. Pollack directed members to look at the DLI Web site for some examples. He said he believes the department has adequately demonstrated that the medical costs of Minnesota’s workers’ compensation system are excessive. Pollack does not understand where health care providers’ comments came from and referred to a couple of recent articles. One by the Minnesota Safety Council was in Volume 15, No. 4. It is an in-depth article that says, “Workplace injuries down, costs up.” Pollack reported the comments coming out of the task force were, “maybe we should do a better job of controlling the number of injuries to reduce costs.” The Minnesota Safety Council said that we are doing a good job with job injuries, but the costs are going up. The December edition of Risk Insurance talks about California’s recommended changes. They prohibit doctors from referring outpatient services to specialty or small clinics where they have a vested interest. Pollack has noticed a real trend lately where some orthopedic people who were doing work on their employees would not do surgery anywhere else. He did not name the facility. Having served on this committee, he understands they are getting paid at 100 percent of “usual and customary” at that facility. Pollack noted Daniels and, he believes Robinson, touched on, “what does usual and customary mean” and where are these costs at? Daniels asked whether the health care providers are losing 15 percent and Robinson asked if they are losing 50 percent. Pollack related the true costs to “smoke and mirrors.” The health care provider decides what they want to charge and see who is going to pay it. Right now the workers’ compensation system is paying at 204 percent of Medicare. This was one of the most intriguing and frustrating experiences Pollack has had in quite awhile. He thinks we have a real opportunity in front of us to be able to help the providers of these services understand clearly that to maintain the employment force in the state of Minnesota we have to do something to control costs. Pollack also said that during the meeting something he was concerned about was the groups that were seeing a reduction in the reimbursement for services were very clear to state they are going to have to transfer those costs to someone else. Someone else in the system is going to have to pay. What he did not hear was, “the employers and other individuals feel that these costs are causing them such difficulties, maybe we can come up with an opportunity to reduce our costs. Maybe we do not need to have MRI scans in every hospital. Maybe you could go to best practices.” Pollack heard, “the system is not too bad, in fact, we need more money.” Thaden noted he came to all the meetings of the task force except Oct. 14, 2003. He comes from a very basic point of view. He sits on a joint labor-management health plan that spends about $44 million a year on health care; they spend a lot less for the same thing there than we do under workers’ compensation. He understands there is a slight difference in costs because of some transaction costs and maybe some other things, but it is a lot less under the health care than we spend under workers’ compensation. He thinks they are either shifting costs from his health care plan over to the workers’ compensation plan, because that is where they can make money, or they are charging too much. Thaden stated we should be paying approximately the same under workers’ compensation as we do under the regular health care plan. To Thaden, it is very simple.

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Daniels expressed concern about putting statutory limitations on treatment and comparing the costs to Medicare. If a person is healthy when injured on the job, the objective should be to get that person back on their feet. We all want to reduce injuries and costs. Daniels is also against a lot of the recommendations. People say, “reduce the injuries and it will reduce the costs,” but he said certain people get injuries on the worksite, so we have to do whatever we can to get them back into society. Schnell commented this is not an easy issue. She said it is the workers who are going to pay the price for this through less access and more difficulty going through the system. It is difficult enough as it is with what they have to go through and when you listen to these members whose lives have drastically changed, you know they have difficulties doing anything in their daily life, let alone work, and it is those people who pay. It is not just about the money. It is about people’s lives being affected and some of these recommendations are just going to go onto those workers who are injured. I have some serious concerns about that. Hickey commented that the one thing we have to do is keep our eye on the big picture. Health care costs are out of control. The small employer is doing all it can to keep a health insurance policy in place and to comply with compulsory workers’ compensation. It will get to the point where there is going to be nothing left for those workers for fringe benefits and raises, which are very important to people. The employee representatives on the advisory council have some very serious concerns and we have to balance it. Where is this system going? Are we going to reach the point where health care costs, in general, and workers’ compensation costs are just going to gobble up all the employers in this state, minus maybe those that are extremely lucrative? That is not most of his members. Bailey noted when someone is injured they need the drugs now and cannot wait for drugs from Canada. We have seen what managed care can do, but it is not the whole answer. There needs to be a compromise. If we do not do something, employers will not be able to do business in Minnesota and they will leave the state. We have to find a way to control the costs or we will have the same problems we have with health insurance and we will not be able to afford it. Brener said that is what everyone at this table wants. Robinson made an observation after 24 years of following workers’ compensation. We have been adding more and more control to the system. He is not so sure that adding more pages to the legislation has made the process any better. He is not suggesting we should abandon Chapter 176, but suggested that maybe we have regulated or caused the system to be so regulated by both internal and external vested interests that all it is doing is costing us a lot of money and not giving us a great deal more service. He is absolutely convinced the thirdparty-payer system is the primary cost driver. Until we get the parties that have the true vested interest more closely involved in managing the costs, he would suggest that the costs are going to continue to go up. Hargarten supplied information about critical access hospitals per a request from Rep. Dan Dorman. She noted Rep. Joe Mullery asked how you define a “critical access” hospital and reported that a federal joint commission defined it in one of two ways. Either it is certified by the state as being a necessary provider of health services to residents in the area or it is a hospital that has a patient census of less than 25 and is located more than 35 miles from a hospital or another critical access hospital. There are a total of 45 hospitals defined as critical access hospitals in the state of Minnesota. Primarily, they are in areas of the state that

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are considered to be outside of the metro area, such as Ada, Cook, International Falls, Melrose, Sleepy Eye and Tracy. Dorman asked for a list of the 100-bed hospitals too. Hargarten provided copies of both lists to members of the council. II. Approval of the June 11, 2003 meeting minutes With a quorum present, Bailey made a motion to approve the minutes from the June 11, 2003 meeting. David Olson seconded the motion. All voted in favor of the motion and the motion passed. IV. B. Filing deadline for retraining plans Brener introduced Steve Hollander from the Minnesota Association of Rehabilitation Providers (MARP) with an issue for the WCAC to consider in its 2004 bill. Hollander stated he is the chairman for MARP, a QRC and a small-business owner. He came before the WCAC on behalf of MARP to ask for a law change regarding retraining filing timelines. In 1995, there was a law passed that imposed a 104-week limit on filing a retraining plan. This timeframe was changed in 2000 to 156 weeks. Hollander believes this extension was meant to address the same problem that he is before the WCAC to address today, but the 2000 law change did not really get to the heart of the issue. The problem is that there are some injured workers who are not medically recovered to a point where the QRC can propose a meaningful, thoughtful retraining plan at 156 weeks. At 156 weeks, some injured workers are not yet released for work and may still be recovering from injuries or medical treatment. They may be anticipating additional medical treatment or surgery and, without knowing physical restrictions or functional capabilities, it is difficult for the QRC to put together a retraining plan that makes any sense. Hollander proposed a simple fix to the law. He suggested maintaining the 156-week timeframe that is currently in place, but adding language that says if an individual is not at maximum medical improvement (MMI) at 156 weeks, then the timeframe is changed to 13 weeks following maximum medical improvement. Hollander asked members to keep in mind that 156 weeks is a long time. Most individuals who participate in rehabilitation plans are able to do so in that timeframe with or without a retraining plan. MARP is proposing that this change be made to take care of those individuals where that is not the case. Oftentimes these individuals are the ones that are most seriously injured and certainly should not be punished because of that. Thaden asked whether that means they have until week 163 to file the plan under Hollander’s proposal, if MMI was reached at week 150. Hollander confirmed that was correct. Thaden asked if MMI did not come until week 200, whether that would mean they could file the plan anytime from week 200 to 213 or could the plan be filed anytime from week 0 to week 213. Hollander said, technically, it could be filed at 0 to 213 weeks, but the idea is, as a QRC you want to make sure you have enough information to file a meaningful plan and, hopefully, you take into consideration a person’s physical restrictions, etc. In that scenario, you could probably file a plan between 200 and 213 weeks.

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Hickey asked what percent of the cases or how many cases this would impact. Hollander said it is hard to say a number, but it is very few. The current 156-week limit is fine for the majority of the cases. He said some people are not ready to file a retraining plan when that timeframe comes. It’s probably just an arbitrary number; it has nothing to do with where they are medically. Thaden asked how many people do not reach MMI at 156 weeks and, therefore, should not have had a retraining plan. He understood a plan could not be created until you figure out where the injured worker is. Hollander said he could think of a couple of different instances. The extra year was welcome, but there is still a problem. QRCs are sometimes scrambling to put together a retraining plan by the deadline. The plan has to be on the table at 156 weeks and, when the employee is not yet ready, these plans are not well thought out. The last thing we want to do is push for a plan that does not make any sense. The extra year was supposed to rectify this. Hickey asked what some of the typical injuries are that would fall into this scenario. Hollander responded they are the classic back injuries, where an individual will get injured on the job; they perhaps have surgery for a decompression in the lower back or something like that. Two years later, the injured worker is having more problems with his or her back and they go to a doctor. They try various conservative modalities and it does not work. The doctor recommends a fusion, so you are looking at a fusion taking place at 156 weeks. We do not know what kind of results we are going to have from that. Pollack asked whether a judge would stick to the parameters in a case like this or be flexible and come up with his or her own interpretation of the law. Hollander said case law supports the 156-week limit. The department might have better knowledge. He has gone to great lengths to get voluntary agreements from insurers for extensions in cases like he described, but they do not have to. He had two cases where they have. Daniels said he thinks this is a good idea. If an injured worker goes past the 156week limit, they will need the extra 13 weeks to get more training. Ellefson made a motion to incorporate MARP’s proposal with the other workers’ compensation issues to be considered for the WCAC’s final 2004 package. Thaden seconded the motion. All voted in favor of the motion and the motion passed. IV. E. Legislative initiatives Anderson distributed a legislative overview. Last year’s WCAC bill is still sitting in the Senate. She noted items one through seven on the handout were approved by the WCAC last year, but they can be changed. The medical cost containment will be another big part of the bill discussions, along with the MARP language and the religious exemption the WCAC will be talking about at the next meeting. DLI is also going to be meeting with the Minnesota Insurance Guarantee Association in the next couple of weeks about some provisions they want to bring to the WCAC.

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IV. F. 2004 meeting schedule Brener pointed out the proposed 2004 meeting schedule in member’s packets. He asked members to consider a January meeting, because he thought they are going to need it. He noted session would begin Feb. 2, 2004. Discussion followed. Bailey made a motion to add an extra meeting to the schedule on Jan. 7, 2004, from 9:30 a.m. to noon. Thaden seconded the motion. All voted in favor of the motion and the motion passed. The meeting was adjourned at 11:39 a.m. Respectfully submitted, Debbie Caswell Executive Secretary dc/s