Head Off DME/Ancillary Cost and Utilization Challenges by Taking a Preemptive Approach

The drive to reduce opioid use for pain management is sparking an increase in durable medical equipment (DME) and ancillary services to manage pain. With the growth of DME and ancillary, challenges with rising costs and utilization concerns can be expected ― the kind of challenges that sparked pharmacy benefit management programs (PBM) to manage financial and clinical outcomes for pharmacy usage. 

With national workers’ comp spending at $38 billion in 2017 ― 10% DME, almost $4 billion dollars ― it’s prudent for companies to take a preemptive approach to manage the costs of DME/ancillary and ensure that injured workers are getting effective treatment.

Companies need to be watching their DME/ancillary dollars. Without focused oversight of this spend, a few years from now it will be a shock to see DME expenses increase from 10% to 20% ― not just from the unit cost rising with inflation, but from an increase in utilization.

The need for pain management

As healthcare professionals look for ways to decrease opioid prescribing, injured workers need alternatives to manage through the pain cycle. This is especially important for injured employees who are returning to work, which would preclude the use of opioids. Items likes TENS units, electro-therapy and physical therapy are pain relief options that are being increasingly used.  Just as pharmacy benefits have programs and formularies to manage costs and utilization, a strategy to manage DME/ancillary can prevent unexpected costs and promote appropriate therapies.

Factors impacting DME/Ancillary Expenses

In addition to reduced opioid utilization, a contributor to the boost in DME/ancillary use is the aging workforce. Older employees are staying on the job longer which increases the probability of needing DME when an injury happens. As a result, growth in DME/ancillary utilization should be expected as the graying of the workforce trend continues.

Managing DME spending is also complicated by the HCPCS reimbursement coding strategy which is not an exact science. The coding is not one-to-one as in pharmacy, it’s one-to-many. There’s room for a lot of creativity in coding and several items can be lumped under one reimbursement code. Unless there’s a process to manage what’s under that code, a payer can be stuck with bills for things it shouldn’t, and at a much higher rate, which compounds for a double whammy.

How to structure a program to manage DME/Ancillary

A proactive program to oversee durable medical expenses needs to not only look at the cost of DME but how to manage the distribution of these products. A good place to start is to look at what’s worked in pharmacy. Optum data show our PBM saved workers’ comp clients 63% on drug costs in 2017 by providing well-managed formularies with brand to generic substitutions and lower cost alternative products.

A solid prospective program that includes all of the things that have worked well in pharmacy should include a product catalog and suppliers who are electronically integrated at the point of sale, similar to how pharmaceuticals are integrated at the pharmacy. Just as the pharmacy automatically dispenses a generic without a discussion of which generic is selected, DME items like canes, walkers, standard wheelchairs, TENS units, etc. should be vetted in advance for the best medical efficacy at the best cost structure.

If it’s automated in a way that’s predictable and reliable, the cost structure is manageable and, more importantly, injured workers get their DME in a timely manner. This way, time isn’t wasted adding touches and getting adjusters and case managers involved in selecting products where their involvement adds more administrative burden to an already overloaded team. This frees companies to focus on things with greater impact such as orthotics, prosthetics, hearing aid programs, and home and vehicle modification. These solutions are more complex ― dollars are much higher and the cost impact on claims reserves is especially important for claims handlers to understand.

Changing from referrals to programmatic

Automating the DME supply chain means moving from what has historically been a referral-based approach to DME dispensing, to a programmatic process. Instead of calling a vendor when something is needed, it should be approached by partnering with a company that can deliver an end-to-end solution.

That solution must allow:

• Orders to be placed prospectively ― products are in stock and available when the order is placed and dispensed within very short turnaround times.
• A mechanism for healthcare providers to contact the DME/ancillary partner company to get authorization to stay within network
• An out-of-network retrospective component so that DME that wasn’t ordered prospectively can be brought into network and billed at the network price.

Benefits of a managed DME/ancillary program

A managed DME/ancillary program provides deeper discounts, confirmation of need, and fulfillment management ― very similar to managed pharmacy programs.

A managed DME program also allows companies to discover gaps in network coverage and the opportunity to fill the gaps by growing the network. There may be places where there are large populations of employees and a lack of suppliers to fill DME/ancillary needs. Identifying these locations and needs allows companies to bolster the network or create other arrangements to keep orders filled in-network. This way, companies can manage claimants’ DME/ancillary needs before the order is filled by out-of-network providers that have not been credentialed and contracted at the most appropriate reimbursement rate.

Ongoing management and monitoring of DME/ancillary utilization and the accompanying data provide visibility into claimants’ activity and offer verification that medical necessity continues. This is especially important for refills. If medical necessity remains, then formulary providers that have a better cost structure can be utilized. And products and services can be expedited to injured workers so that claims can be resolved.

The benefits of managed DME/ancillary programs are numerous: improved patient care, education and time savings for adjusters and support staff, identifying trends and increased program control through reporting ― which yields money savings. As DME use continues to rise, keeping an eye on costs and utilization will prevent unexpected surprises negatively impacting the bottom line.