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Once upon a time, reporting medical-bill data to the 50 states for workers' compensation claims was a fairly simple process. In those early days, when the jurisdictions first began implementing fee schedules, states had no clear way to know if providers were operating properly, so states asked providers to submit medical-payment data, typically one or two items every year.

State regulators, of course, found that data very valuable, mainly because it helped them benchmark against other states, and helped their workers' compensation laws work more effectively.

With the first medical-bill reporting model, all you had to do was report--in any format at your disposal. With the new model, not only must you report, but your data has to be accepted by the state's electronic workers' compensation system--a major challenge considering that the scope of data went from one or two elements to, in some cases, 212 data elements. If a workers' comp payer submits the data incorrectly by neglecting elements or reporting them using an incorrect format, its report is quickly rejected and falls into the category of "unreported" medical data. If that data isn't corrected and resubmitted within a deadline (90 days, for example), then the payer is subject to financial penalty.

"State reporting isn't new," says Jody Thompson, chief operating officer at StrataCare, an Irvine, Calif., company that provides traditional mail-in and/or electronically submitted bill-review services for the workers' compensation payer community. "But what has changed has been that those three states have decided to use the HIPAA data reporting standards for workers' compensation medical claims. And that change can be problematic for payers."

Jenny Orosz, manager of state reporting and compliance at StrataCare, says that this change is putting a lot of pressure on the payers, especially nationwide payers, who face different data and formats across jurisdictions.

"From a technology company standpoint, the interesting thing about state reporting is the integration between bill review and claims software," Orosz says. "One of the driving forces behind our strategy to help our payer customers manage this situation is we are the last place before the check gets cut." Ann Ritter, senior vice president at Ingenix, an Eden Prarie, Minn., health-care information-technology provider, says the main issue to meeting this challenge is that there is no magic bullet.

"It's going to be a learning process for everyone," she says. "The new reporting challenge is definitely a pain point because of its newness, and the fact that each state may have different requirements."

She adds that the situation requires a "wait-and-see" approach, to gauge how well this goes. "Once that happens, in the first quarter of 2007, we'll have a better idea of how to help our clients manage their situations," she says. California, Texas and Florida are expected to adopt the changes by the end of the first quarter of 2007. Oregon and West Virginia are next in line, says Thompson.

In California, one workers' compensation carrier is finding its path to compliance. ICW Group Insurance Services, based in San Diego, is exploring third-party vendors for a solution that complies with whatever California comes up with in terms of regulations to support Web-based billing, reporting and payment.

"Developing such a solution in-house is cost prohibitive for us," says Dennis Osgood, senior vice president, workers' compensation claims, at ICW.

Osgood adds that, so far, the requirements for reporting medical payment data and first and subsequent report data electronically have not been a technology problem, mainly because of ICW's association with vendors that have provided the necessary technology, whether they be bill-review partners or third-party administrators in states outside California.

"We leverage their technology to meet state requirements," Osgood explains.

ICW was one of the first companies to be compliant with first and subsequent reporting requirements in California back in 2001.

In fact, with the advent of electronic medical data reporting in California, ICW partnered with StrataCare because the latter developed a full-blown solution that resolved not only the reporting issues, but also error correction, resubmission processing and the host of issues that can arise with such a detailed reporting requirement.

"We believe that this partnership will allow us to remain fully compliant now and in the future in a very cost-effective manner," Osgood explains, noting that the reporting differences among the states are simply a part of doing business across the country.

"The varying requirements have not caused us any great challenges from state to state," he says. "It is mostly a matter of understanding the differences and partnering with firms who are knowledgeable and professional providers of products that meet the requirements in the particular states."

Tom McCauley, an independent consultant, based in Lafayette, Calif., works with carriers, TPAs and other workers' compensation-related companies.

"The motivation behind the changes is to gather data for policymakers to manage the system better," McCauley says. "But for the most part, I think the whole process of state reporting/data gathering on delivery of benefits of workers' compensation has been a train wreck, with a lot of injured parties."

For example, McCauley says, California initially missed the cost of these reporting changes by a factor of 10.

"In general, the regulators in California--and it has happened everywhere--said it would cost $100,000 for a medium to large carrier to implement EDI. But for most to do it, it will cost well over $1 million," he says.

"They greatly underestimated the cost," he continues. "And they did it by putting out a scope of data that was well beyond what was necessary. The thinking was, 'It's out there, let's collect it.' But they were not paying attention to what was needed to get that data. And that drove costs up to a greater degree."

He says that California's intentions were noble, because no one disagrees that the one thing you want to have in workers' compensation is good data. But, he adds, getting that data right is much tougher than regulators thought.

"In California, they created a complex process, and that means you need to have someone who can figure it out. This is unquestionably a complex process with all these data elements," McCauley says.

StrataCare's approach to that challenge was to begin building a process in both technology and service to help clients like ICW meet this emerging need.

"Right now, we're creating a new tool that will enhance this process tremendously," Thompson says. "It's a difficult challenge, especially if a missing data element is in a third-party data source, or is not typically a workers' compensation claims data point.

"For example, a state might ask for a provider's license number, which was never required in the past," Thompson says. "We're offering our clients a way to meet those requirements without having to build their own solution."

TOM STARNER lives in Philadelphia.

January 1, 2007

Copyright 2007© LRP Publications