Public Risk September 2018 by Moire Marketing Partners

PUBLISHED BY THE PUBLIC RISK MANAGEMENT ASSOCIATION SEPTEMBER 2018

THE UNUSED WEAPON IN FIGHTING THE OPIOID EPIDEMIC PAGE 6

ALSO IN THIS ISSUE

GO BEYOND “BEST PRACTICES”

Fixing Harassment and Adding Respect to your Culture PAGE 11

TRANSPARENCY IN HEALTHCARE

PAGE 16

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SEPTEMBER 2018 | Volume 34, No. 8 | www.primacentral.org

CONTENTS

The Public Risk Management Association promotes effective risk management in the public interest as an essential component of public administration.

PRESIDENT Jani J. Jennings, ARM Risk Manager City of Bellevue Bellevue, NE PAST PRESIDENT Amy J. Larson, Esq. Risk and Litigation Manager City of Bloomington Bloomington, MN PRESIDENT-ELECT Scott J. Kramer, MBA, ARM County Administrator Autauga County Commission Prattville, AL DIRECTORS Brenda Cogdell, AIS, AIC, SPHR Risk Manager, Human Resources City of Manassas Manassas, VA Forestine Carroll Risk Manager Memphis Housing Authority Memphis, TN

Precision Medicine

THE UNUSED WEAPON IN FIGHTING THE OPIOID EPIDEMIC By Larry Saunders, CFP

Sheri Swain Director of Enterprise Risk Management Maricopa County Community College District Tempe, AZ Donna Capria, CRM, CIC, AINS Risk & Insurance Coordinator WaterOne of Johnson County Lenexa, KS Michael S. Payne, ARM, HEM Risk Manager City of Fresno Fresno, CA Melissa R. Steger, MPA Asst. Director, Workers’ Compensation University of Texas System Austin, TX NON-VOTING DIRECTOR Marshall Davies, PhD Executive Director Public Risk Management Association Alexandria, VA EDITOR Jennifer Ackerman, CAE Deputy Executive Director 703.253.1267 • jackerman@primacentral.org ADVERTISING Jennifer Ackerman, CAE 703.253.1267 • jackerman@primacentral.org

Go Beyond “Best Practices”

FIXING HARASSMENT AND ADDING RESPECT TO YOUR CULTURE

Transparency in Healthcare By Belva Hale and Mike Rossi

By Karl Ahlrichs, SHRM-SCP, SPHR

IN EVERY ISSUE

Public Risk is published 10 times per year by the Public Risk Management Association, 700 S. Washington St., #218, Alexandria, VA 22314 tel: 703.528.7701 • fax: 703.739.0200 email: info@primacentral.org • Web site: www.primacentral.org Opinions and ideas expressed are not necessarily representative of the policies of PRIMA. Subscription rate: $140 per year. Back issue copies for members available for $7 each ($13 each for non-PRIMA members). All back issues are subject to availability. Apply to the editor for permission to reprint any part of the magazine. POSTMASTER: Send address changes to PRIMA, 700 S. Washington St., #218, Alexandria, VA 22314. Copyright 2018 Public Risk Management Association

| 4 NEWS BRIEFS | 19 ADVERTISER INDEX

SEPTEMBER 2018 | PUBLIC RISK

MESSAGE FROM PRIMA PRESIDENT JANI JENNINGS, ARM

ust like the song remembers, those Friday night lights of football within the first weeks back to school bring images of team spirit, exhilarating athletic competition and community comradery. I was raised on football. Not only was my dad the high school football coach, but both brothers played football and I was a cheerleader rooting for the team from the sidelines. I’ve been told it’s a Nebraska state law to be a football fan. Nebraskans shut down all other events during football season. If someone has the nerve to plan their wedding on a football Saturday, they know they need to have a T.V. set up in the reception hall so the attendees can watch their beloved Cornhuskers. However as of late, football can bring worry to some fans, parents and coaches. When listening to sports broadcasts, we hear a steady stream of news reports about NFL or NCAA athletes who have sustained (or are suffering from the latent consequences of) a concussion. Even so, only half of high school players say they would admit to notifying their coach if they had sustained a concussion on the field in an effort to stay in the game. All 50 states have enacted laws addressing student athlete concussions. Most of these laws: • Provide for immediate removal from play when a student-athlete exhibits signs of a concussion. • Prohibit same-day return to action and permit return to play only after the athlete has been cleared by a licensed medical professional. • Require coaches to complete an education program. • Require schools to provide concussion information to student athletes and their parents.

‘

When I feel that chill, smell that fresh cut grass

I’m back in my helmet, cleats, and shoulder pads

Standing in the huddle, listening to the call

Fans going crazy for the boys of fall

It’s imperative that our schools, universities and municipalities understand the importance of having and implementing a strong concussion management plan. This means policies and procedures to include training and resources to school professionals or youth league coaches and educational videos and information at school orientations and PTA meetings.

‘

The Boys of Fall

~Casey Beathard

young people learn the value of hard work and healthy competition but it also teaches them teamwork and respect for others. Let’s strive to ensure we are working toward making these sports safer for our young people so they will remain healthy and continue to enjoy the fun of athletic competition! Sincerely,

While football seems to get the worst rap, concussions occur in many other sports such as soccer, hockey, rugby, basketball, baseball and lacrosse. As risk managers, we need to ensure we are working toward making these sports safer for our young men and women and reduce claims involving concussions. Reach out to PRIMA to gain assistance with effective policies, appropriate risk transfer and necessary preventative safety measures for our young athletes.

Jani Jennings, ARM PRIMA 2018-2019 President Risk Manager City of Bellevue, NE

Organized sports programs are so important to young people. It keeps them active and occupied, yet allows kids to be kids. Being involved with and around sports all of my life, I’ve seen the impact it can make. Not only do

SEPTEMBER 2018 | PUBLIC RISK

NEWS BRIEFS

NEWS Briefs

SCHOOLS CAN BAN GUNS, RULES MICHIGAN SUPREME COURT The Michigan Supreme Court has ruled that the Ann Arbor and Clio school districts have a right to ban guns from their schools—in a closely watched case that deals a blow to gun rights advocates who had argued state law prohibits schools from enacting such policies, reports the Detroit Free Press. Both districts had adopted policies that barred the possession of guns on school property and at school-sponsored events. They each were sued by separate gun rights groups. Michigan Gun Owners, along with parent Ulysses Wong, sued Ann Arbor Public Schools. Michigan Open Carry, along with parent Kenneth Herman, sued Clio Area Schools. The 4-3 ruling upholds a 2016 ruling by the Michigan Court of Appeals, which came to the same conclusion. It came after the court held oral arguments in April. The ruling comes nearly six months after a deadly school shooting in Florida left 17 students and adults dead and sparked nationwide conversations about school safety. “I’m very happy. I think our board will be very happy,” said Fletcher Spears, superintendent of the Clio district in Genesee County. “We believe in the position that we took.” Said Ann Arbor Public Schools Superintendent Jeanice Swift: “It appears that school districts and boards of education will have the latitude to adopt policies like those we’ve adopted. We think that’s a win for children across Michigan. We think that’s a win for local boards of education and local control.” But Jim Makowski, the attorney for Michigan Gun Owners and Wong, said the decision saddens him because he believes it will do nothing to improve school safety.

PUBLIC RISK | SEPTEMBER 2018

“Now criminals can be confident that most school districts are not going to allow firearms on property,” Makowski said. “Now we’ve just created a whole bunch of soft targets that are not going to be protected by an individual with a firearm.” It’s an argument that doesn’t sit well with Spears, a life member of the National Rifle Association and a concealed pistol license holder. “There have to be some common sense limitations,” Spears said. Many school districts have developed policies banning guns in schools, concealed or not, saying they have the right to ensure the safety of their students. The state law prohibits a “local unit of government” from, among other things, banning the possession of firearms. A key issue in the case was whether that applies to a school district. The Michigan Legislature defines a local unit of government as a city, village, township or county, the Michigan Court of Appeals noted in a ruling in 2016.

not only has the Legislature not done so, it has expressed its intent not to preempt such regulation.” “Because an unambiguous statute showed a legislative intent not to occupy the field of firearms regulation, the districts’ policies were not impliedly field-preempted.” The opinion was written by Justice Bridget Mary McCormack, who was joined by Justices David Viviano, Richard Bernstein and Elizabeth Clement. Chief Justice Stephen J. Markman wrote a dissent, arguing that the majority failed “to address the threshold inquiry of whether the school districts possessed the authority to adopt these policies in the first place.” Markman wrote: “Because school districts do not possess the authority to adopt policies that conflict with state law and the policies at issue here clearly conflict with state law, these policies are plainly invalid. Accordingly, I would reverse the judgments of the Court of Appeals.” Justices Kurtis Wilder and Brian Zahra also dissented.

Here’s what the Michigan Supreme Court said in the ruling: “The Legislature has the authority to preempt school districts from adopting policies like the ones at issue that regulate firearms on school property; however,

Makowski said there are no options left for the court case. “It’s a state law issue. We are done. We’re done with this.”

AFTER HARVEY, FEMA SAYS IT WILL DO BETTER IN 2018 HURRICANE SEASON

FEMA Associate Administrator Jeffrey Byard said that among his agency’s main goals is readying the nation for catastrophic disasters, which includes working with other agencies and local governments to establish a “critical lifeline of food, water and shelter.” For instance, FEMA has increased its supply of “thousands of bottles of water to millions,” he said, testifying before a House Transportation and Infrastructure subcommittee considering whether the nation is ready for hurricanes this year. All told, the 2017 hurricanes and wildfires caused an estimated $370 billion in damages, said subcommittee Chairman Lou Barletta, R-Pa. FEMA issued a report analyzing the 2017 hurricane season, which acknowledged staff shortages during Hurricane Harvey and other disasters. The report said the agency had made progress in preparing its workforce “but had not achieved its targets.” FEMA’s 2017 performance drew criticism from panel members. “They admitted in that report what everyone knew: the agency’s response was inadequate, to put it mildly, and in the case of Puerto Rico and the Virgin Islands, outrageously inadequate,” said Rep. Peter De Fazio, D-Ore.

ship. The minute we stop looking at ourselves and taking a hard look at ourselves because of what we fear others may say, we’ve lost the ball, we’ve lost the leadership.” Byard said that in Texas, FEMA recognizes the importance of better land-use planning and local building codes.

He added: “It makes no sense for us to continue to rebuild the same way disaster after disaster.” Barletta noted that the Senate has yet to act on legislation called the Disaster Recovery Reform Act, which the House passed this spring.

“New development should be built away from high-hazard areas and existing structures should be relocated to safer areas when possible to minimize impacts from hazards,” he said.

Among its provisions, the legislation would allow the federal government to provide direct funding for local governments to pay for employees who implement or enforce building codes aimed at limiting damages from disasters.

Barletta argued that taking steps to prevent damage before floods is “a wise investment of federal dollars and the only way we, as a nation, will be able to change the direction of rising disaster costs and losses.”

In addition, the bill directs FEMA and the Federal Highway Administration to work with local governments to identify or develop evacuation routes to move people away from harm.

“

They admitted in that report what everyone knew: The agency’s response was inadequate, to put it mildly, and in the case of Puerto Rico and the Virgin Islands, outrageously inadequate.

“

A top Federal Emergency Management Agency official testified that his agency has updated plans and procedures to prepare for the 2018 hurricane season after assessments, some of them internal, of failures during last year’s string of epic natural disasters, reports the Houston Chronicle.

Rep. Peter De Fazio, D-Ore.

“FEMA acknowledged its failures but also was acknowledging that it had people on staff eradicating any trace of any consideration of climate change in its strategic planning. Now that’s going to work out real well, isn’t it,” De Fazio added. Byard responded that FEMA “had taken a hard look at itself and pointed our finger at ourselves. …We hear terms like failure, we hear terms like admission. We look at that as leader-

SEPTEMBER 2018 | PUBLIC RISK

PUBLIC RISK | SEPTEMBER 2018

THE UNUSED WEAPON IN FIGHTING THE OPIOID EPIDEMIC BY LARRY SAUNDERS, CFP

ACH PERSON’S BODY RESPONDS DIFFERENTLY TO THE SUBSTANCES WE CONSUME. My buddy drinks coffee all day with no problem while I have to switch to decaf after the first cup. Another friend has issues with milk products and gluten where I’m fine with both. Clinicians and drug manufacturers have known for years that it works the same way with prescription drugs.

In 2003, Dr. Allen Roses, a senior executive at a major drug company, caused quite a stir when he said that fewer than half of the patients prescribed some of the most expensive drugs actually derived any benefit from them. “The vast majority of drugs—more than 90 percent—only work in 30 or 50 percent of the people,” Dr. Roses said. “I wouldn’t say that most drugs don’t work. I would say that most drugs work in 30 to 50 percent of people. Drugs out there on the market work, but they don’t work in everybody.”1 Fortunately, 2003 was also the year that the sequencing of three thousand million base pairs of the human genome paved the way to significantly improve how medicine is prescribed.

WHAT IS PRECISION MEDICINE? Precision medicine is a medical model that proposes the customization of healthcare, with medical decisions, treatments, practices, or products being tailored to the individual patient. In this model, diagnostic testing is employed for selecting appropriate and optimal therapies based on the context of a patient’s genetic content. Now patients no longer have to rely on the antiquated trial and error approach to prescribing medication. An analysis of cells easily obtained from the inside of the cheek can predict if a drug will work in their body and provide their clinician with information about what dosage is best suited for them. Precision medicine saves time and money that would have otherwise been wasted on ineffective or unsafe drugs. It also reduces adverse drug reactions, which have been estimated to cost $136 billion annually.2

HOW DOES PRECISION MEDICINE WORK?

Most medications are prodrugs, which means they don’t provide any therapeutic benefit until the enzymes in our bodies change them from an inactive metabolite into an active metabolite. For example, codeine is a prodrug that is inactive until our enzymes turn it into the active metabolite, morphine, at which point we receive an analgesic effect. This is why some patients may have excellent pain management after a surgery when they are receiving morphine intravenously only to go home with an opioid prescription and receive very little or no pain relief. Precision medicine examines the DNA of the enzyme that the prodrug utilizes to predict how efficiently the prodrug will be turned into the active metabolite.

SEPTEMBER 2018 | PUBLIC RISK

PRECISION MEDICINE – THE UNUSED WEAPON IN FIGHTING THE OPIOID EPIDEMIC

HOW CAN PRECISION MEDICINE FIGHT OPIOID ADDICTION? Breaking the cycle of opioid addiction can only come with a greater understanding of how it starts. That is the premise behind using precision medicine as a weapon in the fight against the opioid epidemic. Since nearly 80 percent of opioid addictions begin with prescription opioids, it seems reasonable to conclude more precision in prescribing them would impact the incidence of addiction.3

WHY ISN’T PRECISION MEDICINE BEING DEPLOYED TO FIGHT OPIOID ADDICTION?

Although the genetic test to find out your ancestry only costs $99, the kind of genetic test that can predict the efficacy of drugs is still expensive. Some factors driving this cost can be revealed by examining the circular issues of the clinicians, the payers (self-funded employers and insurers), and the laboratories.

A simple genetic test, using DNA collected via cheek swab, would identify those patients whose only impact from taking opioids may be a higher risk of becoming addicted. Hydrocodone acetaminophen (Vicodin), a commonly prescribed opioid prodrug, is metabolized into hydromorphone in the liver by the enzyme cytochrome 2D6 (CYP2D6). The efficacy of hydrocodone is much higher in patients who metabolize normally through this metabolic pathway. However, roughly 2 out of 10 people don’t metabolize normally through CYP2D6.4 Poor metabolizers receive very little analgesic effect from opioids at normal dosages. Subsequently, they are at risk of taking more than is prescribed to achieve minimal pain relief. Conversely, ultra-rapid metabolizers are at risk of overdose at normal dosages with pain relief wearing off rapidly. As mentioned earlier, most patients exhibit well-controlled baseline and breakthrough pain when on intravenous morphine in a hospital setting. Unfortunately, this gives the practitioner no indication that they may have an issue using opioid tablets that require metabolization for ongoing pain management. A simple genetic test, using DNA collected via cheek swab, would identify those patients whose only impact from taking opioids may be a higher risk of becoming addicted.

PUBLIC RISK | SEPTEMBER 2018

One reason clinicians may not administer the test as part of their standard protocol for pain management is benefit plans don’t cover it. I suspect that clinicians would rather not deal with patient complaints about tests they ordered that were not covered by insurance. Although some benefit plans initially covered these tests when they were first introduced, the high cost of $2,000–$3,000 quickly hit their radar as a claim that needed managed. Some responded by only paying for the test as a last resort and only if definitive medical necessity was demonstrated. Most decided not to cover the tests at all. The laboratories invested in technology, equipment and people when these tests were first developed. Their business model was predicated on processing a high volume of tests that were reimbursed by insurance companies at the high rate. Many labs are now experiencing financial difficulties due to those projections never materializing. Now they typically only get reimbursed by insurance 20 percent of the time and have to write off the other charges as bad debt since the patients rarely pay.5 In response, labs are investing in costly clinical studies to

provide evidence these tests are effective. In the meantime, they continue to raise their prices in an effort to survive.

WHAT’S THE SOLUTION?

No one knows for sure, however, I’m advocating a clinician, payer, laboratory partnership where all their respective issues are resolved. It requires the payers to take the lead by agreeing to pay for this test under more liberal and broader criteria. This eliminates the lab’s bad debt and low volume problems enabling them to reduce the cost of processing the test to below $400. At this price point it doesn’t require many successes in the form of eliminating adverse drug reactions to justify the payer covering the cost of testing. Changing the economics allows the payers to encourage the clinician to use this tool to improve patient care and alleviates any concern as to whether this test will be covered. Under this model a health benefit plan can test 50 patients that are prescribed opioids for the cost of one $20,000 inpatient addiction treatment. Identifying the 10 patients who statistically benefit from alternative treatments may prevent at least one addiction from occurring, maybe even 10. This new paradigm makes precision medicine both actionable and affordable for health benefit plans to use as a drug claims management tool to stop addiction before it starts. Taking the guesswork out of prescribing opioids eliminates subjecting patients to unnecessary addiction risk. Larry Saunders, CFP, is president of Genetics4Health. FOOTNOTES 1 Conner, Steve. “Our drugs don’t work on most patients” The Independent, United Kingdom 8 Dec. 2003: Web 2 Johnson JA, Bootman JL. “Drug-related morbidity and mortality. A cost-of-illness model.” Arch Intern Med 1995;155(18):1949–1956. www.nehi.net/bendthecurve/ sup/documents/Medication_Errors_%20Brief.pdf. Accessed September 17, 2012. 3 Muhuri PK, Gfroerer JC, Davies MC. Associations of Nonmedical Pain Reliever Use and Initiation of Heroin Use in the United States. Rockville, MD: Substance Abuse and Mental Health Services Administration; 2013. http://archive.samhsa.gov/ data/2k13/DataReview/DR006/nonmedical-painreliever-use-2013.pdf. Accessed May 13, 2016. 4 Andrea Trescot, M.D. “Genetic Testing in Pain Medicine” Pain Medicine News Apr 2013 5 Barrett Brunsman. “Assurex Health Sold for $225M” Cincinnati Business Courier Aug 2016

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GO BEYOND BEST PRACTICES

FIXING HARASSMENT AND ADDING RESPECT TO YOUR CULTURE BY KARL AHLRICHS, SHRM-SCP, SPHR

SEPTEMBER 2018 | PUBLIC RISK

GO BEYOND “BEST PRACTICES” – FIXING HARASSMENT AND ADDING RESPECT TO YOUR CULTURE

HIS YEAR HAS TURNED OUT TO BE A YEAR OF ACCUSATIONS AND RESIGNATIONS — and as public sector leaders and risk managers, we need to examine how we got here, what we should do now, and what similar challenges are on the horizon.

You may think we are going through a “perfect storm” of harassment in the workplace, but I feel it is bigger than that. After a “perfect storm” passes, the world returns to a normal state. This current wave of harassment accusation appears to be a fundamental climate change in how our culture handles power and ethics. You have two choices—be reactive and live in fear of it happening to you or be proactive and get ahead of it. Good risk management demands that we get ahead of it. There is no easy fix, and many of the “best practices” of the future are now “dead batteries”—they never really worked well, and now they have lost more effectiveness. This is an opportunity for you to evaluate your organizational strategy for dealing with harassment in all forms— sexual, quid pro quo, third party, toxic environment and bullying. Each of these are based on power and respect, and all reduce your organization’s productivity and increase your legal risk. As a risk management and human resources expert, I always look to prevent litigation and challenging episodes for my clients, and to help build positive, high-performing anticipatory cultures that will thrive in the future.

Here are some basic steps to consider in strengthening your policies and practices: • Remember, it’s all about power. Power is at the heart of harassment and sexual abuse. Power comes in many forms—from the position or title, from relationships, from persuasion, etc. There are benefits from personal maturity—Plato described the ideal leader as a “Philosopher King,” who was a servant of their people. Training should cover power in all forms, and how to best handle power when it is misapplied. • Diversity and inclusion helps. Fostering an organizational culture that respects human

PUBLIC RISK | SEPTEMBER 2018

dignity is key to creating sustainable results. If you promote civility and respect, you will engender not only loyalty and hard work, but also an enviable culture that becomes part of your message to the public and your marketplace. Training should include a foundation of diversity and inclusion. • Humans are complex. Don’t treat this as a simple exercise. The issue of hidden bias, implicit bias, confirmation bias, and other psychological factors make us all very complex thinkers. By realizing the “hard wired” filters that we all work with, we can craft more careful messages and get better traction for behavior change.

• Do a cultural audit—You can use modern engagement metrics, or hire outside experts to do a cultural audit. Get a good “read” on your organizational culture. The audit process will give you vital information to shape more individualized training, and you should consider other tools that may be necessary to improve reporting, prevention and compliance. Training should focus on advanced communication theory and “soft skills.” • Build trust in human resources. I predict that with this current climate of retribution, complaints will initially go up as there is a significant volume of harassing activity that has not been reported. Our national culture of retaliation against whistleblowers needs to be remedied, and human resources needs to be seen as a trusted ally. While whispers and rumors are often not reliable, they can alert an employer to look further. Does your HR staff have good business rapport with your employees? Is there a choice of individuals, both male and female, to whom complaints can be directed? • Have high standards for your HR professionals. Hiring and promoting well rounded, empathetic and smart HR professionals is invaluable in maintaining solid trust with your employees. Pay attention to their backgrounds, and recognize the certifications that are available (SHRM-CP and SHRM-SCP, PHR and SPHR) that signal competence in the HR body of knowledge. • Improve your training, both in quality and quantity. Existing training materials are mostly legal compliance language, attempting to change behaviors with threats and fear tactics. Simply put, they don’t change long-term behaviors. Plan ongoing “Respect in the Workplace” training (the rule of thumb is every two years—check your state’s laws) and make it interactive and engaging, and mandatory. Supervisors have additional responsibilities, so there can be some benefit in training them separately. Don’t make the training boring or too long, and look at new delivery technologies and techniques that can give it traction. • Pay attention to your metrics. Organizational culture varies by department, and warning signs about toxic work

environments may already be found in your HR metrics. Look for turnover of high performing people by department—if a supervisor isn’t keeping the “good ones,” look deeper for the reasons. So, why pay so much attention to this? There are pivotal moments in history where we Americans have examined our attitudes toward fundamental things—civil rights, sexuality, equal pay, and other key components of life in a diverse country. This surge in harassment accusations is another equally pivotal moment, and now we are facing the crucible of confronting the daily revelations of past poor choices and offensive behaviors. Let me make it more personal. Your brand reputation—that priceless, intangible perception that takes years to build—can be lost in

an instant and communicated everywhere in social media. Imagine the intangible costs to the Weinstein Company or NBC or Fox News, then swap in the name of your organization and imagine your personal losses. This “climate change” is real, and just beginning. I look at this active shift of power in organizations as the time for leaders to take stock of their systems and step up their game. Leaders should see the changing social landscape as a time to reinforce their commitment to a sustainable high performing culture, and handle harassment, diversity and inclusion as the foundational building blocks that they are. It’s not being “trendy”—it is smart risk management for all of us. Karl J. Ahlrichs, SHRM-SCP, SPHR, is a senior consultant for Gregory & Appel Insurance.

So, why pay so much attention to this? There are pivotal moments in history where we Americans have examined our attitudes toward fundamental things—civil rights, sexuality, equal pay, and other key components of life in a diverse country. This surge in harassment accusations is another equally pivotal moment, and now we are facing the crucible of confronting the daily revelations of past poor choices and offensive behaviors.

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RANSPARENCY IS A POPULAR WORD USED TODAY but rarely when discussing healthcare. Why? Because health insurance is somewhat of a mystery.

The fees shown on the health insurance billing are based on a charge master, which is a pricing document that is virtually always propriety in nature and not something you, as the employer, are able to review. Explanations of Benefits identify the cost of each charge and then apply the discount, but the discount applied still does not reveal the true cost of the visit, test, procedure or facility fees. It isnâ&#x20AC;&#x2122;t just the employer and employees who are frustrated with the health insurance system as it is, but physicians and hospitals as well. Employers who offer self-funded health plans are being faced with ever-increasing costs. Unfortunately, without transparency, understanding the cause of the increase is not always known. The fees on the charge master inflate every year a minimum of 3-5 percent without any regard to actual inflation, making the increased trending in employerâ&#x20AC;&#x2122;s health insurance plans questionable. Is the increase in costs due to utilization, high claimants, pharmacy or the arbitrary inflation of the charge master?

PUBLIC RISK | SEPTEMBER 2018

Employers seeing limited methods of reducing costs are implementing high deductible health plans in an effort to more evenly distribute the costs between the employer and employee. This type of plan may have lasting ramifications as it can mean employees are avoiding needed treatment that can lead to catastrophic claims in the future. The high deductible health plans also put physicians and hospitals in a tenuous position as most employees struggle to pay the high deductible and co-insurance. This forces a shift off the focus of the care of the patient causing the healthcare provider to become a collections agency rather than a caregiver. Past strategies to create a health insurance plan that provides a method for employers to offer affordable premiums for their employees as well as maintain rich insurance plans have not been as successful as hoped. This is partially because there has not always been a strong desire for employers, physicians and facilities to work together. The only options to keep premiums in check appeared

to be changing copays, deductibles, coinsurance percentages or out of pocket maximums rather than changing the entire dynamic of how health insurance can work. Transparent Pricing Arrangements hope to change that trend as they offer a way to have the employers, physicians and hospitals in the community work together and decrease the costs of providing quality healthcare. This model addresses the three major issues most employers face today: an ability to see the actual cost of medical treatments, a direct relationship with the providers, and a health insurance plan that is affordable for the employers and employees. The Transparent Pricing Arrangement model establishes pricing for medical treatments based on fees set by Medicare plus a percentage. Medicare pricing represents the nationâ&#x20AC;&#x2122;s baseline or â&#x20AC;&#x153;floorâ&#x20AC;? for medical claims costs, and unlike a charge master which is protected data, Medicare

SEPTEMBER 2018 | PUBLIC RISK

TRANSPARENCY IN HEALTHCARE

pricing is public. While the data can be cumbersome due to the vast number of ICD10 codes, it can be reviewed by anyone. This allows each employer to have a level cost structure from which to begin the analysis and build the plan. De-identified claims data is collected for the previous 12 months and an independent agency completes an analysis to determine the percentage above Medicare that an employer is currently paying. Once that percentage is established, negotiations take place to lower the reimbursements hospitals and most physicians will accept as payment in full. Hospitals and physicians are eager to discuss this arrangement because it eliminates collections and provides a direct contractual relationship with the employer by eliminating the â&#x20AC;&#x153;middle manâ&#x20AC;? (the

For employers

who offer flexible

spending accounts or health saving

accounts, having a

copay-structured plan provides a model that employees can offset payment concerns as they are able to set

aside the necessary funds easily.

PUBLIC RISK | SEPTEMBER 2018

administrative services organizations). Reductions in cost can be as much as 20 percent, not just to the hospital costs, but to the entire plan. There are specific reasons the reduction is so dramatic. One reason is that most Administrative Service Organizations (ASO) such as Blue Cross Blue Shield, United Health Care, Cigna, Humana or Aetna charge a per employee, per month administration fee that includes the cost of the PPO network. The PPO network fee usually varies but can be as high as $15.00 per employee per month, but not all ASOâ&#x20AC;&#x2122;s will reveal the cost of the network fee. Again, an example of the lack of transparency. If your current ASO fee is $35.00 per employee, per month, the cost of your network could represent as much as 42 percent of that fee. Most third-party administrators (TPA) also pay a fee for networks in the absence of having its own network to offer. There is an administration fee associated with the Transparent Pricing Arrangement plan, but is it much less because there no network, and therefore, no network fee. This model also allows a small fee to be paid to the hospital for its participation. Since there is no network, there are no hidden propriety costs and all claims are based on Medicare fees. All fees are transparent and are much less than the current PPO fee structure. If balance billing occurs, the third-party administrator negotiates the claim on behalf of the employer, and the employee can be held harmless. The employer has the ability to structure the plan to best fit its needs. A second way costs are reduced is due to the low inflationary rate of Medicare pricing. Increases in the fee structure are not automatic as with a charge master, and if inflation does occur it is at a lower rate of 1.5-2 percent, This allows a better understanding by the employer of what is causing increases in medical claims. A common concern expressed by employers and employees is, what happens if out of town treatments are necessary? Currently, your ASO or TPA is negotiating out-of-area or out-ofnetwork claims on behalf of the employer and employees. This still occurs with the Transparent Pricing Arrangement plan with the TPA negotiating the outstanding claim, and if no current contract exists with the physician or facility utilized, the fees are negotiated at a Medicare rate rather than applying a discount

off a charge master. For specialty hospitals or facilities who are used frequently within your plan, contract negotiations can occur and there has been success in decreasing the cost for many facilities that, in the past, were unwilling to accept lower fees. Another positive component of the Transparent Pricing Arrangement is that it eliminates deductibles and coinsurance, and the employee is only responsible for a copayment for all benefits. Physicians and hospitals are willing to take less in fees with this plan design because in high deductible plans, around 60 percent of the patients only pay approximately 30 percent of the total bill owed. As an example, a copay of $250 for an outpatient procedure allows the employee an affordable payment and the services provided are bundled into a single payment structure for the employee and employer for all contracted hospitals and physicians. For employers who offer flexible spending accounts or health saving accounts, having a copaystructured plan provides a model that employees can offset payment concerns as they are able to set aside the necessary funds easily. The current federal restrictions on the amount employees can place in their FSA has hindered their ability to allocate enough money to meet most high deductible plan deductible and co-amounts. The Transparent Pricing Arrangement program has been extremely successful in Ohio, Kentucky, Michigan and Tennessee, with each employer netting savings. Some employers offer this plan design alongside their current plan or plans; however, within two years of offering the Transparent Pricing Arrangement, virtually all employers eliminate any other plans. This is due to the high employee enrollment in the Transparent Pricing Arrangement plan as employees love the simplicity and ease of understanding how the plan works. The key to the success of this plan is the willingness of your local facilities and physicians to participate but, once the plan is explained, the providers are quick to share in the belief that this program offers a way to allow healthcare to return to the original reason most entered the field: patient care. Belva Hale is the vice president for business development with Sherrill Morgan. Mike Rossi is the president of Employer Advisory Services.

ADVERTISER INDEX

Genesis Management and Insurance Services Corporation. . . . . . . . . . . . . . . . Inside Front Cover Liberty Mutual Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 14 Munich Reinsurance America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Back Cover Old Republic Insurance Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 10 Rimkus Consulting Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 2 States Self-Insurers Risk Retention Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inside Back Cover Travelers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . page 9

CALENDAR OF EVENTS

HAS YOUR ENTITY LAUNCHED A SUCCESSFUL PROGRAM? An innovative solution to a common problem? A money-saving idea that kept a program under-budget? Each month, Public Risk features articles from practitioners like you. Share your successes with your colleagues by writing for Public Risk magazine! For more information, or to submit an article, contact Jennifer Ackerman at jackerman@primacentral.org or 703.253.1267.

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PRIMA WEBINARS September 26, 2018 Parks: The Risks Beyond Slides and Swings October 17, 2018 The Ever-Changing Cyber Landscape

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November 28, 2018 Post-Traumatic Stress Disorder in First Responders December 19, 2018 Social Engineering and Computer Hacking

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SEPTEMBER 2018 | PUBLIC RISK

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