I’ve long held that broad-based attempts to control the price of medical service are, at best, a short term fix, and at worst, a blunt instrument that actually encourages over-treatment and extended disability.
Greg Krohm, Executive Director of IAIABC, has a similar take. Speaking for himself and not in his IAIABC role, Greg notes:
“payment rules like fee schedules are devoid of financial incentives for good medicine and good treatment outcomes, [emphasis added] including early return to work…I can think of no reason for a clinician – other than professional & moral values – to put in the extra time it takes to counsel and manage patients on tricky issues like return to work, pain management, therapeutic programs, and the prevention of re-injury. The payment is a flat rate per billing code without regard to quality or care given.”
Greg is, or course, dead on. His column is well worth a read and re-read, as he delves into several related issues. But for now, let me focus on just the price issue.
Fee schedules attempt to control cost by controlling just one aspect of the medical cost equation – which is:
Price x utilization (number of services used) x frequency (percentage of claims that use that type of service) = cost.
Some services – MRIs. for example, are indeed more a price than a utilization problem (not that there isn’t over-utilization of imaging, but price is a more important driver), so focusing on price per service makes sense. Hospital and facility fees are another service type that are primarily a price-per-service issue.
Physical therapy is much more of a utilization problem; the price per service is relatively low, but the number of services tends to be quite high, and many payers struggle to control utilization.
Even if price is the issue, attacking price alone without paying attention to utilization and frequency is akin to plugging one of three holes in a dam; the water will just seek out the other gaps, enlarge them, and before you know it the flood is even worse.
That’s but one aspect of the issue; we haven’t even touched on how low fee schedules disincent provider participation in workers comp thereby reducing access to care, or the inability of the regulatory process to keep pace with medical innovation, or bill review vendors charging some payers merely to reduce provider bills to an inordinately-low fee schedule.
WorkCompCentral’s Greg Griggs has written an excellent piece on this issue; [sub req]Griggs interviewed a couple folks who disagree with Greg Krohm’s views.
What does this mean for you?
Price controls. and artificially low prices, don’t reduce total costs.
Apr
14
Great topic, but this piece just seems to scratch the surface. The development, approval, and implementation of a state fee schedule is very much a political exercise. It’s easy to see where various commission politics have been influenced by simply reviewing the payment policies across state jurisdictions. Following your focus on pricing, many states clearly empower medical providers to collect what some would consider to be windfall profits for certain treatments and procedures. Anytime a State stands behind the ability of a medical provider to collect on a bill incorporating 4,5,and 600+% mark-ups there is something amiss! From a payor standpoint, there is no justification to match fee schedule payments in many cases when the collection rates for the same treatment from commercial/Medicare payors may only be a fraction of a state’s MAR. As hospital charge inflation continues to rise, the ripple effect is rising work comp premiums that are forcing employers to relocate to other states, opt-out of comp coverage, or downsize their workforces. The hospital industry is a revenue machine and needs no more state assistance. Where’s the relief for employers who are forced to pay outlandish premiums to cover their carriers MLRs?
Ben – welcome to MCM.
Unfortunately, it is the nature of blog posts that they can’t delve into an entire issue. That’s what books are for.
re your question “Where’s the relief for employers who are forced to pay outlandish premiums to cover their carriers MLRs?”, I’d suggest they can always vote with their feet and move their business; if they can’t find a carrier that has a reasonable approach then band together with other employers, contact the local multispecialty group, and sign a direct deal.
Paduda