Florida – the end of the happy times

While I and a few thousand other industry folks have been conferring in Las Vegas, the world (most inconveniently I would add) has been marching forward without us. In Florida, it looks their progress is headed right for the edge of a metaphorical cliff.
Florida’s workers comp regulatory bosses yesterday approved a change in the way workers comp payers will reimburse outpatient facility bills. According to WorkCompCentral, Florida regulators will:
“begin drafting a rule to base outpatient fees paid to hospitals on the Medicare Outpatient Prospective Payment System. But the fees would be adjusted using Florida-specific multipliers based on the usual-and-customary charges now employed to establish outpatient fees…Under the new system, the Medicare-based fees would be adjusted by a new factor created by a hospital’s usual and customary charges, by 174% for outpatient surgeries and 395% for other outpatient services.”
Okay, here’s why this is a bad idea.
First, Medicare fees are for treatment of elderly folks. Not working age, employed people. As a corollary, providers treating Medicare patients are not concerned with functionality or return to work. CMS has repeatedly stated their reimbursement methodology is specific to their population, and discouraged use of that methodology by other payers.
Second, The reimbursement scheme pays hospitals 74% more than Medicare for surgeries and four times Medicare for other outpatient services. This is insane. Workers comp is already the most profitable line of business for Florida hospitals, and this methodology makes it even more lucrative. It is indeed unfortunate that the Sunshine State has the second highest percentage of working folks without health insurance, but why make workers comp payers cover their medical bills? No, there’s not a direct link, and no, this wasn’t expressly addressed (as far as I know as I wasn’t at the hearing) but from here it sure looks like workers comp payers are being asked to help facilities cover the underpayments from Medicaid and provide funds to help treat the uninsured.
Oh, and these costs will now be the highest in the country.
Third, basing reimbursement on charges is just nutty. Providers increase charges around 14% every year This methodology now locks in a 14% trend rate for outpatient hospital services in Florida. Take it to the bank (if yours is still in business) – the slope of the inflation line is about to steepen dramatically.
Fourth, according to sources present at the hearing, there are serious problems with the methodology and data used to support the three member panel’s decision. Florida State University health economics guru Gary Fortier submitted a brief that stated that the methodology being used by the Department was “fundamentally flawed,, and in my opinion the study and methodology used cannot be relied upon….to make policy.” Fortier also warned that once this payment system, which encourages greatly increased utilization of hospital services to treat WC patients, is put in place it will be hard to change even if payments become more tight-fisted in the future.
Mike Malloy, former managed care analytics expert at E&Y, gave details about how easy it will be for hospitals to game their charges and drive up employers’ costs under the proposed system.
And FairPay Solutions (HSA consulting client) presented industry statistics illustrating how paying hospitals 333% more to treat WC patients than they are paid by FL group health plans creates such significant financial incentives that it will inevitably lead to greatly increased treatment of work comp patients by hospitals and cost Florida employers several hundreds of million of dollars more.
As I’ve noted here and here and here this is going to end up costing the comp industry in Florida a lot more than many think.
What does this mean for you?
the end of the happy times in the Sunshine State.