South Carolina* is a great example of what happens when hospitals are financially incentivized to treat workers comp claimants. Costs go up dramatically, and – surprise! premiums quickly follow.
That hasn’t stopped Florida from merrily marching off the cliff.
But suicidal behavior isn’t limited to those who listen only to southern rock. No, even folks in the frozen north can succumb. The latest victims are in Minnesota, where hospitals and insurance companies are haggling over a hospital inpatient payment standard that would pay smaller Minnesota hospitals about 90% of their billed charges; larger hospitals would get about 85% of their billed charges on higher-dollar inpatient bills.
Are they nuts? Has the cold frozen their brains solid? Too much time in the ice-fishing shack?
Whatever the reason, the result will be the same. Hospitals, which have been absolutely hammered by the recession and accompanying decline in reimbursement, drop in elective surgeries, and increase in the uninsured, are going to be relying on comp to offset their losses and shortfalls, and with fees based on a reduction below billed charges, what’s to stop hospitals from just raising their billings as high as they want?
(the real answer is there are some very tenuous and weak controls, but they will have little effect – hospitals are pretty much free to bill what they wish)
And that’s not all: Minnesota hospitals’ billed charges are rising far faster than hospitals’ costs. Ignored is the fact that, as WCRI’s analyses have shown, it is those states (such as Maryland, Massachusetts & Connecticut) that have made WC a reasonable but not generous payer for hospitals where the WC system is most cost-effective for employers.
And injured workers have better outcomes, too.
*South Carolina put in a Medicare+40% hospital fee schedule on 10/01/06. Now, per NCCI, there is a 23.7% WC rate increase filed and pending.
What does this mean for you?
Higher hospital costs in Minnesota. A lot higher.
Jan
27
Currently, Massachusetts hospitals are compensated at 95% of Medicare rates that were in effect in 2004. This will change very shortly so that rates will rise to 95% of current Medicare rates and then continue to float slightly below Medicare rates, rising annually as Medicare rates rise.
Pennsylvania hospitals are currently reimbursed at 1994 Medicare rates x 113% x all of the yearly increases in the average weekly wage since 1994, a whopping 53.77% of them. Tack on another 12% for the cumulative effect of the increases and this amounts to hospitals being reimbursed at 1994 Medicare rates plus approximately 78%.
Now, one must question what the heck our legislators where thinking when they put this WC reimbursement structure together back in September of 1993. How does one even come up with something so convoluted? My guess is too many martinis or a joke that went really bad.
In any event, there’s no pending legislation to provide any relief for PA employers or insurance carriers. It’s not even on the radar.
Note to PA Employers:
There’s a reason so many occupational medicine clinics are popping up in every Tom, Dick, and Harry Hospital. The occ med clinics in of themselves are not profitable, but they feed all of their ancillary services to the hospital so that you’re paying a premium for physical therapy, diagnostic services, etc. It’s a gold mine for hospitals.
Tip:
Immediately remove all hospitals and all occupational medicine clinics associated with the hospital from your WC provider panels. If faced with an emergency, injured workers have the right to treat with any hospital ER of their choice so listing a hospital on the panel will not help you direct care to any particular hospital. If your injured workers do treat with an ER, make sure they are directed to a non-hospital panel physician as soon as the emergency is resolved. You have 90 days to control the care. Take advantage of it.
Result: Your medical costs associated with WC injuries should significantly decrease and therfore your WC premiums will decrease as well.
Joe –
Hospital inpatient costs, actually charged to and paid by comp carriers, tied to Medicare inpatient rates is ludicrous. A contracting methodology for inpatient services tied to a specific dollar rate based on the kind of room occupied times the number of days found to be “medically necessary” – and rigorously enforced – makes far more sense than a Medicare per diem “plus” adopted by far too many comp jurisdictions. Additionally, tying any increases in the per diem rate to medical inflation with a specific cap guards against the spiralling tendencies taking place in SC, Minn, et al.
What researchers for the comp jurisdictions do not realize is that the comp inpatient admission may be more expensive because of the resources used to treat the patient’s diagnosis, however, the duration of the admission is far less than for similar procedures for patients over than age 65. For those that describe work comp inpatient admissions are far more difficult or costly you need to study the data a heckofalot more closely.