Two things – facility costs and pharmacy.
We’ll get to pharmacy next week (I’m finishing up the Seventh Annual Survey of Prescription Drug Management in Workers Comp), but for now here’s a couple quick hits on the growing problem in facility expenses.
Today’s WorkCompCentral [sub req] highlights the results of a recent WCRI study examining cost drivers in North Carolina. a study that indicates the “average hospital payment per claim was about $9500 in North Carolina, the highest among all the states examined. The average charge for inpatient procedures was 49% higher than the median.” [emphasis added]
Note this was back in 2007; while WCRI does good work, the nature of their process is such that the results are somewhat dated.
The fee schedule was changed back in mi-2009, lowering the cap on inpatient hospital reimbursement from 77.07% to 75%, a whole 2.07 percentage points and outpatient from 95% to 79%.
If anyone thinks this is going to make any difference at all, they’re not thinking.
Gaming the ‘percentage off charges’ ‘fee schedule’ is ridiculously easy; this nominal decrease will have zero effect on actual payments to hospitals, and thus will do nothing to lower payers’ medical costs in North Carolina, costs which, according to WCRI, wer up 9% in 2007.
The fee schedule reduction was a complete waste of time. That may not endear me to the folks who, I am sure, worked diligently to address the issue, but that’s a fact. What NC should have done was change the methodology from a percentage off charges to something much more certain and fair – a cost-plus based system would have been a good, albeit imperfect, alternative.
We need a reality check.
Workers comp will pay about $31 billion in medical expense this year.
Health care costs will total about $2.7 trillion this year.
I raise this often-overlooked fact to point out that employers and insurers will not be able to rely on networks to control costs, as work comp networks have little buying power, and thus little ability to influence price per service.
Therefore, regulators have to step into the breach, and provide real, actionable, metric-based fee schedules based on something much more solid than the facility’s charges.
What does this mean for you?
Higher facility costs will drive medical expense which will drive up combined ratios – and premiums.
Oct
22
It seems like workman’s comp case managers spend so much time and effort requesting records, getting forms completed, and assuming every injured worker is malingering that they add to costs as much as they save.
Agree! I’m still new to this industry but I still remember my boss told me the first day how stupid it is to have a % off charges FS because the hospitals can charge whatever amount they want.
I’m working on a project to use the Cost-to-Charge ratio info provided by the CMS to estimate the cost of services, then plus x% markup for the hospitals. The problem is, nobody knows what a fair value of x should be.
Use of the CMS hospital cost reports is a good place to start in developing a reimbursement methodology that prevents the facility from successfully increasing their charges epitomized by their “chargemaster”. Graphing the CMS data by admission diagnosis/procedure codes is a good start, but in displaying “actual charges” – room fee, supplies, ancillary services, etc – for each day of the confinement, it reveals the decreasing consumption of services and supplies until the day of discharge. From that data base, one can develop a per diem rate that would reimburse facilities for all services and charges and no more. To “cap” the total reimbursement for the inpatient confinement, one can use astatistically supported “alos”(average length of stay) by diagnosis code, i.e., 3, 4 or 5 days!
This is a pure “risk” type arrangement that delivers meaningful savings as long as facilities can freely pass along their costs for services and supplies at any time during a contract period.
When is comes to “capping” the write-off or discount by the hospital, that should be negotiated to everyone’s satisfaction but in the course of that negotiation it should not gut the underlying worth of the per diem.