It’s not a crime for North Dakota state employees to use taxpayer funds to fly first class; run up hundreds of dollars in bar bills; pay for hotel rooms – then not use them; spend thousands to go to Tony Robbins seminars; pay millions to redo executive homes; drop twenty grand to go to the Presidential Inauguration; wasteful, indecent, unethical, but not illegal.
But a state employee can be convicted of a felony when his head of finance orders and pays for food for employee meetings and celebrations; discharged employees don’t pay back money they don’t owe; and the agency he runs provides employees with gift cards for motivational rewards – gift cards worth ten bucks each.
Oh, and the state employee, former state fund CEO Sandy Blunt never ordered, authorized, signed for, used, took, distributed, or otherwise handled any gift certificate. The program had been running for SIX years before Sandy arrived and the agency had a complete system running that did not include nor require his approval.
Unbelievable, but true.
That’s the situation in NoDak, where former state fund CEO Sandy Blunt was convicted of the crime for misusing more than $10,000, a sum that the prosecutor got to by adding up lots of flowers, cards, cakes, and sick leave (that had been acceptable when his predecessor authorized them) plus moving expenses paid to an employee who was fired (and, it turns out, didn’t have to pay anything back).
Yet somehow when the state university’s employees waste millions, it’s not a crime?
Can someone explain this? Anyone?

There’s been a lot going on in New York’s work comp system; heated discussions over adoption of disability and medical treatment guidelines, an uproar over assessments for self insured groups, and ongoing actions and attempted actions regarding the pharmacy fee schedule have kept our attention focused on the Empire State for lo, these many months.
Now comes news that New York may be the first state to dramatically increase payment for cognitive services. I heard this from WorkCompCentral’s Mike Whitely, who informed me that New York Work Comp Board Chair Bob Beloton is looking to raise reimbursement for physician evaluation and management codes by 30%.

Mike will have much more on this tomorrow (read WCC to see); I’ll focus my comments on the whys and wherefores.
First off, this is a good move, for many reasons. Fees haven’t been increased for 14 years in New York, making it high time for a raise.
Second, if there’s one service that is waaay under-valued in work comp, it is the time the treating physician spends with the injured worker, discussing the injury and treatment options, providing insights into medical care under work comp, educating the worker and their family about return to work, and discussing same with the employer and insurer. A 30% increase is money well spent.
Third, this will hopefully draw the attention of other states, and get them thinking about the significance of cognitive services.
All that said, I do have a major concern – as should you. About half of the care delivered to work comp claimants in NY is thru a discounted network. These networks may well try to keep their current discount arrangement, as a higher fee schedule will mean they deliver more ‘savings’ and thus earn higher fees (they get paid on a percentage of the ‘savings’, or the delta beween the fee schedule and contracted reimbursement amount).
It will be too bad if this (possible) increase doesn’t result in actual increases in reimbursement, and instead just makes networks more profitable.
What does this mean for you?
Good news.

Summer is ending next week, and favorable tax treatment will sunset not much later. With the end of vacation season fast approaching, investors will likely step up the pace, while owners looking to maximize their take-home are motivated to get deals done before 2011.
Another big motivator is the large amount of cash sitting idle as private equity firms have been waiting for things to settle down before risking their investors’ funds.
Here’s what’s happening.
ISG Holdings announced this am that they have finalized their purchase of Bunch and Associates. The deal took forever to close, but now that ISG owns the managed care vendor look for Bunch to dump their Ingenix relationship and move to Stratacare (part of ISG’s holdings).
Part of Bunch’s attraction for ISG was the potential to move their bill review from Ingenix to Stratacare, a move that will increase margins by a couple million bucks. This won’t be easy nor smooth, as Bunch has built a lot of logic in and around the PowerTrak bill review system, logic that has helped Bunch sell their services to self-insured employers. There are going to be some pointed conversations down in Lakeland (Florida, Bunch’s home) as the new owners look to maximize margins while customers, and customer advocates, look to proceed with caution.
Earlier this summer, Odyssey Investment Partners’ One Call Medical acquired transportation and translation company STOPS, broadening its workers comp portfolio. From a synergy perspective, this makes sense as injured workers often need transportation to their MRI appointment; as the largest MRI network in work comp, OCM should be able to leverage the relationship quickly.
Injured Workers Pharmacy has been looking for a buyer for some time, and the book is still out. IWP got hammered when NY changed their work comp pharmacy regs a couple years back, and has since moved into other states where they try to get claimant attorneys to get their clients to buy drugs thru IWP. Payers report IWP’s costs are much higher than the same, or essentially identical drugs purchased thru PBMs’ retail networks, making IWP persona non grata in the payer community.
PT firm Align Networks was rumored to be considering a sale this fall, but reportedly has decided to hold off for now.
There are a few more possible deals in the works, but we’ll have to wait and see what develops. I’d expect at least two more transactions in the space before the end of the year, perhaps more.

Yesterday I discussed the ongoing debate about potential changes to California’s work comp fee schedule.
In case my position was too subtle, I’ve got grave reservations about using RBRVS (Medicare) as the basis for a work comp physician fee schedule. That said, it looks like RBRVS will replace the current methodology, but there’s still a lot of tweaking to do before the move is finalized.
Today we’ll dive into facility costs, which look to be rising rapidly in the Golden State, driven in part by a loophole in the regs that allow double billing for spinal implants, along with consolidation in the hospital market and the attendent market power. This power is allowing hospitals to get ever-higher pricing in their negotiations with work comp network providers, which, in turn, is reducing ‘savings’ delivered by those networks to payers.
Here’s a quick review of the CA facility fee schedule and some of the nuances and effects thereof.
Inpatient
The Official Medical Fee Schedule (OMFS) for inpatient care is facility-specific, based on Medicare’s MS-DRG methodology plus a 20% multiplier. Thus, WC pays about 20% more than Medicare for inpatient services. The idea behind MS-DRGs was sound – pay hospitals more accurately based on better coding of comorbidities and complications.
In reality, costs have escalated under MS-DRGs as hospitals have gotten better at coding, leading to payments almost 5% higher than projected under the previous DRG methodology.
According to a study published in July of last year by RAND, the spinal implant pass-through results in additional costs of at least $60 million to the system, and that estimate was based on Medicare’s average payment for the devices. Anecdotally, it appears that many work comp payers are likely paying well above that level. Efforts are underway to address this issue, but in the meantime payers are paying much more than they should for these devices.
Additionally, it isn’t too much of a leap to think that this over-payment may drive additional unnecessary utilization, as unscrupulous providers seek to maximize their revenues by performing as many procedures as possible.
Ambulatory surgery
This has been a bone of contention (sorry) for some time for WC payers in California. The regs actually peg reimbursement to hospital fees, at the same 120% of Medicare, resulting in reimbursement that many view as excessive. Quite excessive. Regulators are looking to revise the regs, and many expect reimbursement to decline as a result.
The revision process is happening as you read this; the latest proposal calls for adjusting the ambulatory surgical center fee schedule by reducing the multiplier for ambulatory surgical center facility fees to 100% of the Medicare outpatient fee schedule, plus a 2% reimbursement for high cost outlier cases. (here’s the latest update.)
So, what’s the net?
I’d argue, as many have, that the work comp facility fee schedule is too high. In some other states this wouldn’t be too much of an issue, as most bills would be repriced to a network discount, negating the fee schedule problem (albeit not entirely).
Unfortunately for payers in California, hospitals’ negotiating power has grown to the point where they can often dictate terms to large group health payers, who have much more bargaining power than work comp networks. In many instances, networks are negotiating deals with hospitals that are not much better than fee schedule
The result? Of late we’re seeing payers’ facility costs climb by double digits, with little relief in sight.
So what to do?
Rather than look for discounts, look at underlying costs. There are wide variations between and among facilities for the same services, and by comparing costs and outcomes, payers can identify facilities that, while they may not offer a ‘discount’ per se, offer a much lower price than a hospital that does promises a discount.
A good place to start is the Dartmouth Atlas where you can find cost and outcome data for specific hospitals.

There’s a lot going on in California’s workers comp system – medical costs zooming up and driving premium increases along the way, narcotic usage skyrocketing, a dramatic increase in scripts for medical foods and compounds, judges upholding controversial decisions, and momentous decisions re changes to the fee schedule. Add the continued news about rising hospital costs, and you’ve got more than enough activity to keep anyone busy.
We can’t cover all the issues here, so a summary will have to suffice – promise to dig deeper into a few later this week and into next.
First, the controversy over changing the workers comp fee schedule.
California does not currently use Medicare’s RBRVS methodology as the basis for its non-facility fee schedule, making CA the only fee schedule state to not use RBRVS.(the other states that don’t use UCR, and I’d argue they really don’t have ‘fee schedules’ in the true sense of the term). The state has been considering moving from its current methodology the Official Medical Fee Schedule, or OMFS) to RBRVS for several years, with considerable progress over the last couple of months.
Most recently, public hearings were held in Sacramento with various stakeholders asked to respond to the latest revisions to the suggested fee schedule, revisions that added an additional $52 million in projected physician payments. I’ll spare the details on the methodological discussions, which have to do with changing teh conversion factor, one of the components of the RBRVS pricing methodology. (workcompcentral.com posted on this August 18). The basic argument advanced by providers is, well, pretty basic – if you reduce reimbursement, there may well be an access problem as providers opt out of workers comp.
According to workcompcentral.com;
“Destie Overpeck, the DWC’s chief counsel, said she was encouraged that most of the providers in the audience seemed to support the division’s multiple conversion factor plan, or at least understood it was needed to smooth the transition to a new system.
Primary care physicians, occupational therapists and providers who bill under the “all other” category would generally see an increase in payments, Overpeck said. “They seem to be saying, ‘Hey, we understand it’s not as high as we want or would get with a single conversion factor, but if you lower the rate on surgeons too much they won’t be there anymore,” she said.”
There is some evidence that lower work comp reimbursement does impact provider participation. When Florida increased reimbursement over a decade ago, anecdotal reports indicated more surgeons started accepting work comp patients. A pretty solid research effort (albeit one specific to neurologists) presented at the meeting showed a strong correlation between reimbursement rates (as a percentage of RBRVS) and provider participation rates; according to the study, “G{eneral] M[edical] fee levels provide the highest correlation (90.7%) with neurologist willingness to accept workers’’ compensation patients.”
The study also noted “a modified RBRVS medical fee schedule set at 156% of Medicare for EM fees and 121% for all other fees (an often-discussed plan) would result in a neurologist WC participation rate of 12.0%, third lowest in the U.S.”
(A METHODOLOGY FOR PREDICTING PROVIDER PARTICIPATION IN WORKERS’’ COMPENSATION MEDICAL FEE SCHEDULES
STEVEN E. LEVINE, M.D., PH.D. AND RONALD N. KENT, M.D.)
Perhaps the key point was best made by Kent Spafford, CEO of OneCall Medical, the leading work comp imaging company. Spafford noted: “The California Workers’ Compensation Fee Schedule is designed to provide adequate compensation to providers, so they are willing to provide care to injured workers. It is not the vehicle to control costs. Any action relative to the fee schedule should be designed to induce current and future providers into the system and not disenfranchise the existing providers.”
Recognizing OneCall’s is keenly interested in the fee schedule as it bears directly on the company’s ability to profitably operate in the state, Spafford’s comments are nonetheless well worth consideration. Without reasonable access to care, disability durations may well increase, the quality of care decline, and system costs continue their current upward trend. Notably, access under the current OMFS is pretty good, with 90% of patients reporting ‘good access to quality care’; the access problems that did occur weren’t related to cost but to administrative hassles, language issues and UR delays. As access is good under the current system, one has to consider the possible benefits of reduced prices – for some providers and some services in light of possible decreased access.
Moreover, as I’ve discussed here on numerous occasions, price per service is but one of, and certainly not the most important, contributor to total cost. As we’ve seen with California’s revised drug fee schedule, cutting price often doesn’t reduce cost – in fact, total drug costs in CA went up – way up – after the fee schedule was slashed.
I’ll draw a distinction between physicians and hospitals; as I’ll discuss tomorrow, California’s hospital costs are high and trending higher, with no likely end in sight.
California’s Division of Workers Comp is working diligently to balance the cost:access equation. I’d suggest that a careful and thorough assessment of hospital costs may well indicate there are lots of dollars to be saved, dollars that won’t compromise access.