Tag Archives: Fee Schedules

Large Variations in Payments for Hospital Outpatient Care to Injured Workers

Back in April of this year, I wrote about a study by the Workers’ Compensation Research Institute (WCRI) in which it was found that fee schedules may increase the number of workers’ comp claims.

Today, the WCRI released a new study that said that “hospital outpatient payments per surgical episode varied significantly across states, ranging from 69 percent below the study-state median in New York to 142 percent above the study-state median in Alabama in 2014,” according to Dr. Olesya Fomenko, co-author of the study and economist at WCRI, and who also is mentioned in my previous post.

The report also stated that “variation in the difference between average workers’ compensation payments and Medicare rates for a common group of procedures across states was even greater—reaching as low as 27 percent (or $631) below Medicare in New York and as much as 430 percent (or $8,244) above Medicare in Louisiana.”

Here are the major findings:

  • States with no workers’ compensation fee schedules for hospital outpatient reimbursement had higher hospital outpatient payments per episode compared with states with fixed-amount fee schedules—63 to 150 percent higher than the median of the study states with fixed-amount fee schedules. Also, in non-fee schedule states, workers’ compensation paid between $4,262 (or 166 percent) and $8,107 (or 378 percent) more than Medicare for similar hospital outpatient services.
  • States with percent-of-charge-based fee regulations had substantially higher hospital outpatient payments per surgical episode than states with fixed-amount fee schedules—32 to 211 percent higher than the median of the study states with fixed-amount fee schedules. Similar to non-fee schedule states, workers’ compensation payments in states with percent-of-change based fee regulations for common surgical procedures were at least $3,792 (or 190 percent) and as much as $8,244 (or 430 percent) higher than Medicare hospital outpatient rates.
  • Most states with fixed-amount fee schedules and states with cost-to-charge ratio fee regulations had relatively lower payments per episode among the study states. In particular, for states with fixed-amount fee schedules, the difference between workers’ compensation payments and Medicare rates ranged between negative 27 percent (or -$631) and 144 percent (or $2,916).

Still think that workers’ comp is doing okay? Still think that keeping the status quo is the best option for injured workers? Still think that thinking outside the box, and considering alternatives to the ever increasing cost of medical care for workers’ comp is stupid, ridiculous and a non-starter?

Or do you believe, as Joe Paduda wrote about today in his blog, that workers’ comp is no longer needed for 90% of America’s employees, as the workplace has become safer than the non-occ environment.

The idea brought forth, and as Joe said, it is an intriguing, but wrong one, is that the medical care can be provided under health insurance, and the disability coverage can be added to long-term or short-term disability insurance.

Whichever way you look at the issue, workers’ comp is not going away, but it is getting more expensive to pay for medical care. The problem here is, too many Americans are slavishly wedded to outmoded ways of thinking, outmoded economic policies and models, as well as an outmoded economic ideology, to think rationally and seriously about alternatives.

Lastly, there are too many cooks (or should that be crooks) with their hands in the pot who have a vested interest in keeping things the way they are. If that is so, then the WCRI is only telling us what we should already know…injured workers are screwed and so are the carriers and employers. As long as outside interests have a hand in the system, and those who profit from higher costs block real change, this situation will only get worse.

I am sure glad it is not my money being wasted like this.

As always, to purchase the study click this link:

http://www.wcrinet.org/studies/public/books/hci_5_book.html

 

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Nickel and Dimed: Hospital Edition

Last week while I was drinking Indio and Dos Equis, Anthony Cirillo, president of Fast Forward Consulting, which specializes in experience management and strategic marketing for healthcare facilities wrote an article in Hospital Impact entitled, “Much like airlines, hospitals nickel and dime patients”, in which he says that hospitals have learned from the airline industry how to nickel and dime patients by making up reimbursement cuts by creatively finding ways to charge extra and often hidden fees.

Mr. Cirillo cites two articles in The New York Times by Elizabeth Rosenthal. The first article, “After Surgery, Surprise $117,000 Medical Bill From Doctor He Didn’t Know”, mentioned that a patient received a bill from an assistant surgeon he did not know was on his case. The bill was $117,000. The primary surgeon was reimbursed for $6,200, but the assistant surgeon billed for, and was reimbursed for the $117,000.

The second article, “As Insurers Try to Limit Costs, Providers Hit Patients With More Separate Fees”, discussed how providers are billing patients for separate fees such as a $1,400 emergency room fee, which the insurer paid , when a husband and wife went to a hospital for a scheduled induction of labor for their second child, and a $2,457 fee for “noncritical activation” of the trauma team in addition to the hospital’s $240 facility fee, after a woman drove her stepdaughter to an emergency room after a bicycle crash.

Cirillo said that patients do have options and choice when it comes to their healthcare. They can choose between local competitors, go cross-county, cross-state, out of state and out of country. Medical tourism continues to grow and with the increasing number of Joint Commission International accredited hospitals, employers are actively choosing to send people overseas.

This option, as I have been saying now for two years, should also apply to workers’ comp. Anyone who thinks that hospitals will not try to stick it to employers and comp carriers for their injured workers’ medical bills is sadly mistaken, fee schedule or no fee schedule.

Employers who are self-insured or who are in a state that allows them to opt-out of the statutory system, are vulnerable to this adding on of fees to the total hospital bill, on top of what the surgeon charges for the actual operation, much the same way patients in the two articles by Ms. Rosenthal were.

When the bill came from the hospital in which my father passed away in, the total bill was over $200,000. I looked through it to see if there were any charges that did not seem right, but could not find anything out of place. With his health insurance paying the majority of the bill, our portion was still over $900.

Cirillo also stated that as high-deductible plans become the norm, these fees impact consumers directly and then cause health premiums to rise in tandem. Sure, he states, there are legitimate fees typically not reimbursed, but then there are the wink and the nod fees that have become so commonplace that they fade into the background and people are numb to them just like the airline charges.

Some employers have high-deductible workers’ comp policies, and it would be incumbent on them and their brokers to explore alternatives to extra and added-on hospital bill fees, and as Mr. Cirillo said, medical tourism can be one such alternative.

A View from the Bench: Medical Tourism and its Implementation into Workers’ Compensation

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Last week, in response to my post, Knee Surgery in Costa Rica — A Less Expensive Alternative, I received a comment from David Langham, Deputy Chief Judge of Compensation Claims for the Florida Office of Judges of Compensation Claims and Division of Administrative Hearings.

Judge Langham stated that: “Medical Tourism is a reality. How far will it go?” and then referred me to an article he wrote in the December issue of Lex and Verum, published by the National Association of Workers’ Compensation Judiciary. Judge Langham serves as a Board Member of NAWCJ.

In his article entitled, On Fee Schedules, Medicare, and Medical Tourism, Judge Langham discusses two studies that I previously mentioned in earlier posts this year. The first post, published on February 1st, was called Outpatient Facility Costs Rising Could Benefit Medical Tourism Industry and discussed a study by the Workers’ Compensation Research Institute (WCRI) that analyzed the outpatient facility costs, cost drivers, regulatory mechanisms, and trends in 20 states.

The second post, published on May 23rd, was called If You Have to Ask…Fuggedaboutit!, in which I mentioned that the Centers for Medicare and Medicaid Services (CMS) had studied various inpatient surgical procedures performed in the US and found that inpatient hospital charges varied considerably from state to state, within the same state, and within the same city, which was noted by Judge Langham in his article. He even went on to cite a Washington Post report that said a hospital in Dallas charged an average of $160,832 for a lower joint replacement, while a hospital five miles away charged an average of $42,632, a difference of $118,200.

But what fascinated me about Judge Langham’s article was not the discussion about fee schedules, Medicare and payments; it was that he mentions medical tourism as a possible solution to high cost surgeries. However, the form of medical tourism Judge Langham refers to in his article, is domestic medical tourism.

Citing the two studies above, and describing the disparities in costs from states that have a fee schedule and those that don’t, Judge Langham suggests that sending patients from high cost states such as Illinois to a low cost state like Massachusetts, will save insurance companies money.

“With the vast disparity in reimbursements demonstrated in the WCRI study released last January and the Medicare data released last May, payors such as insurance companies may find savings in sending injured workers to states or localities with greater cost control for outpatient surgery. Such travel may represent a cost in itself, if not within the same city (see Medicare examples above), but may pale in comparison with the savings gained. Taking the example above, with a cost of $10,000 in the average state, and sending the injured worker to Massachusetts First Class ($1,000) and putting her or him up in a nice hotel for a few days ($1,000) to prepare and recuperate would add only $2,000.00 to the $3,900.00 cost of the procedure there. The $10,000 procedure in the average state might be performed in Massachusetts for an overall cost, including travel and lodging, of $5,900.00. This still represents a significant savings compared to the $10,000.00 cost. More persuasive, this same procedure would cost $15,100 in Illinois. An Illinois employer sending their patient to Massachusetts would potentially save over $9,000.00 on the procedure.”

Judge Langham also stated that there are those who dismiss this potential out of hand, and cites data from a medical tourism facilitator company called New World Medical Tourism. Judge Langham explains that medical tourism is a relatively new industry, and that there are a multitude of firms that arrange healthcare in countries like India, Costa Rica, Mexico, the Philippines and others. They advertise, he states, that medical care in foreign countries can cost 70% to 80% less than in the US.

Judge Langham goes on to say that New World Medical states on their website that a spine surgery in the US might cost $80,000 to $100,000, and the same procedure in India would cost as little as $8,000 to $14,000, a savings of 82% to 92%. New World Medical concedes he adds, that travel and lodging costs must be deducted, but that these costs are generally around $2,500. As for knee replacement surgery, New World Medical says, according to Judge Langham, is estimated at $50,000 in the US, compared to $8,000 in India.

According to Judge Langham, medical tourism has an established foothold in the medical industry, but states that physicians in the US recommend against medical tourism. They caution, he adds, that treatments, implants, and medications provided outside of the US may not be approved of by the Food and Drug Administration (FDA), and that follow-up care after surgery may be substandard. Also, verification of the foreign surgeon’s qualifications may also be difficult.

The Judge says that these are all valid concerns, and as many of us already know, these issues are paramount in solving if medical tourism is to be a viable alternative to high-cost surgery. Judge Langham also states that any patient considering surgery would be interested in reassurance on such questions before agreeing to undergo surgery.

Another point Judge Langham makes is the following:

“These quality of care concerns are not as persuasive in the argument for medical tourism to Massachusetts. Certainly, the quality of care concerns are also a more difficult argument in the distinction between the two Dallas hospitals cited above. The savings may not be as persuasive either, but the Medicare data cited by the Washington Post and others may drive payors to analyze the selection of provider facilities and perhaps even the benefits of medical tourism in or outside the United States.

In the conclusion of his article, Judge Langham says that both the WCRI data and the Medicare data support the idea that medical tourism within the US may become increasingly attractive to payors in coming years. States like MA, MD, and CA that have lower outpatient costs may attracts workers’ compensation medical tourists from IL, VA, or FL. There are some states, the Judge says, that have statutory or regulatory restrictions that confine any attempt to force an insurance carrier to provide medical services outside the state in which the injured workers lives or was injured in, but that these restrictions are generally limited to the injured worker, and does not preclude the insurance carrier from voluntarily providing such care and the travel costs associated with it.

In my blog post, Medical Tourism and Workers’ Compensation: What are the barriers? and in three other posts that summarize, or link to my White Paper, or are the paper itself, I highlighted many of these and other barriers to implementing medical tourism into workers’ compensation as Judge Langham points out. My paper’s conclusion stated that “the courts are willing to allow some measure of medical tourism in workers’ compensation; how future courts will decide is unclear, but there is at least some precedent for ruling in favor of medical tourism.” It is clear by his article that Judge Langham is concurring with my conclusion. Having someone of his stature in the workers’ comp judiciary sharing my idea is very encouraging, to say the least. It is a sign that there are others who share my thoughts on the subject.

It is also a sign that the “crowd” is beginning to catch up to my idea for medical tourism in workers’ comp, which was why I titled my blog post Far In Front of the Crowd back in August, when Joe Paduda commented on a prior post that I was ‘far in front of the crowd’ on medical tourism and workers’ comp.

In a recent article posted on Insurance Thought Leadership.com by Kevin Bingham, et al., called Workers’ Compensation Comes of Age, the authors wrote that:

“Medical tourism continues to grow as an option for patients all across America. An airline magazine recently had advertisements from hospitals outside the United States showing savings of 50% to 80% on procedures such as knee and hip replacements that are common in workers’ compensation. The general cost in the United States for a knee replacement was shown at $34,000, versus the overseas cost of just $10,000. A hip replacement was listed as $35,000 versus the overseas cost of just $11,000. Even with the cost of airfare, transportation, and hotel accommodations, the potential savings are significant (acknowledging that we aren’t attempting to control for quality or safety differences). With several companies and health insurers investigating offering medical tourism options to their employees and insureds, there could come a day when workers’ compensation insurers could leverage these tremendous savings to help drive down severity for certain procedures. While businesses may welcome the cost savings, we recognize that persuading state legislatures and injured workers to agree to these practices could be difficult.

Mr. Bingham is a principal with Deloitte Consulting’s Advanced Analytics & Modeling practice, and his fellow authors have a diverse background, ranging from Actuaries to a Registered Nurse. The last statement by the authors was another point I raised in my White Paper, but in the case of injured workers, could be handled by offering them a financial incentive of between $2,000 and $2,500 from the savings realized by medical tourism, provided the savings was greater than $5,000, as was pointed out to me some months ago by the president of a health care company that negotiates lower costs for their clients’ workers’ compensation claims.

But despite the difficulties involved at this time getting medical tourism accepted, the medical tourism industry itself needs to do a whole lot of work before they can expand into the workers’ compensation market. As Judge Langham noted, the treatments, implants and medications provided outside the US must be approved by the FDA. It is true that many patients go abroad because certain treatments and procedures are not currently approved by the FDA, such as experimental treatments and procedures for cancer and heart disease, etc. But, for those more routine treatments and procedures that are either too expensive, or for which the patient does not have adequate insurance, complying with the FDA or even surpassing them, should be another goal of the industry.

Also, the industry must find a way to guarantee superior aftercare and follow-up care, which is crucial for the patient’s speedy and successful recovery. This will go a long way in making medical tourism a reliable and safe alternative to medical care at home. And finally, the qualifications and credentials of the surgeons must be known well in advance of surgery and verified. But above all, transparency on cost, on quality of care, on travel arrangements and on the reputation of the medical personnel and facility must be provided to the patient before any decision is made to leave the country. It is the duty and the job of the medical facilitator to guarantee this both verbally and in writing, and to make all necessary arrangements and preparations for the patient.

But the industry itself must work with each and every country that seeks medical tourist dollars to bring about standards and regulations and legal frameworks that will make medical tourism more attractive to patients, employers and insurance carriers in both general health care and workers’ compensation. To do anything less imperils the entire industry.

So, it would seem that medical tourism in workers’ comp is not so far-fetched an idea now as it once was over a year ago when I first started writing my blog. As I said above, the crowd is catching up to me, and I welcome the company, especially when it comes from the second highest workers’ comp judge in the State of Florida and a principal from a major consulting firm. HAPPY NEW YEAR!

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The Rip-off Continues

Once again, Joe Paduda comes up with a post that sheds light on the problems of the US health care system and its impact on Workers’ Compensation. Today’s blog post looks at the way Medicare-based fee schedules have caused Workers’ Compensation carriers to pay more for medical care because the RBRVS (Resource Based Relative Value System) that Medicare uses, estimates the time it takes for physicians to do certain tasks, which in turn determines their bill for the procedures and treatments they perform (you see, I did learn something in my MHA degree program).

According to Joe, time estimates are (generally) way overstated, resulting in higher compensation for docs, higher costs for taxpayers, and a whole raft of downstream unintended effects – including higher costs for work comp payers.

The estimating is conducted by the AMA’s Resource Based Relative Value System Update Committee (RUC). Joe mentions a piece in the Washington Post that said the AMA’s estimates of the time involved in many procedures are exaggerated, sometimes by as much as 100 percent …If the time estimates are to be believed, some doctors would have to be averaging more than 24 hours a day to perform all of the procedures that they are reporting. This volume of work does not mean these doctors are doing anything wrong. They are just getting paid at the rates set by the government, under the guidance of the AMA.

Over thirty states with fee schedules, Joe points out, uses RBRVS as the basis of their fee schedule. California is adopting RBRVS, Joe goes on to say. It is also important to state, that CMS set the dollars per time unit, so the ultimate cost is also based on that as well.

What this means to the Worker’ Comp industry is this, Joe says, there’s no getting around that the AMA’s RUC is inflating the time, and thereby inflating their members’ income, and employers’ and taxpayers’ work comp costs.

The question that the Work Comp industry must ask itself is this, how much longer are you going to stand by and allow the American health care system to rob you, cheat you and steal you blind (pardon the pun). When is the industry going to accept the fact that whatever means you employ to lower the cost of medical care for work comp claimants, the health care system is going to charge you more and more.

You are avoiding a simple economic reality that goods and services always flow to those who can produce those goods and services faster and cheaper. You are causing your own misery by relying on the health care system here to provide you with lower cost care.

The fact that the AMA, CMS, and hospitals (see my last post) are charging the industry more for medical care than what should be charged is proof positive that there is something terribly wrong here.

The refusal of the industry to see reality reminds me of the play I just saw this past Sunday. It was a local production of ‘Man of La Mancha’ in a concert format, and as anyone who has ever seen it, or read the original novel by Cervantes knows, Don Quixote is brought to his senses when his niece’s fiance disguised as the evil “Enchanter” or “Knight of Mirrors” forces Quixote to look into a mirror and see his real face.

That’s where the workers’ comp industry needs to be. It needs to look in the mirror and see what fools they are for trusting the AMA, CMS and hospitals and doctors to provide them with lower costs for medical care.

Medical tourism will offer that, not for everything, but for most surgeries that are by now recognized to be overly inflated and based on a value system that is governed by the practitioners, and not the payers. It won’t be easy to implement medical tourism into workers’ comp, as I have said before, and it is not without its complications and risks, but what is more risky, trusting physicians and government agencies that over-inflate estimates of physician’s time units, or sending a claimant to a medical tourism facility that is the best facility in that destination country and spending a fraction of the cost of care that you would here in the US?

The choice is yours, of course, but like Don Quixote, only you can come to your senses.