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By PETER ROUSMANIERE, an expert on the workers' compensation industry

The rate of inflation for hospital costs appears to be among the highest for workers' comp claims payers. Bill-review professionals say that hospitals take advantage of flawed fee schedules, employing experts to maximize billing. And they assert that state regulation and laws often fail to constrain abuses.

Jason Beans, CEO of Rising Medical Solutions of Chicago, estimated that the average hospital bill charge increased by 23 percent between 2008 and 2009 and then increased by 19 percent between 2009 and mid 2010.

"Simply plot two-, three-, five- or 10-year trending lines on a chart specific to revenue codes for charges on a standard hospital bill. The chart will show exponential growth with no plateau in sight," said Merrit Quarum, CEO of Qmedtrix In Portland, Ore.

The fee schedules of most states are due sharp criticism. Chad Birckelbaw, president of Addison, Texas-based Fairpay Solutions, went so far as to praise Missouri for not having a fee schedule. There, he said, regulators "don't waste resources on determining how to calculate (a reimbursement), but they do have a mechanism to force open, good-faith negotiations from both a payer and provider perspective."

The problem with fee schedules stems from many being set as a percentage of charges. Beans and Quarum also dislike cost-plus schedules. Hospitals can simply charge more or aggressively pile up their accounting for costs.

"We have found hospitals who have formed subsidiary medical-supply companies and have marked up the prices and sold the supplies back to themselves," Beans said.

Asked to cite examples of problematic charges, Birckelbaw pointed to trauma, back and spinal injuries. He added that "hospital-acquired conditions can raise the bill significantly and are not typically carved out."

Quarum noted that surgical "implants and devices are a well-documented source of significant and aggressive (charges), but are not the only area of abuse in spinal surgical billings."

One of Beans' favorite examples are inpatient room rates. In the course of one stay, a person may be charged for his or her room a rate "way more expensive than any hotel."

"Then, on top of that, they are charged for a surgical room, an observation room and a recovery room," he said.

DRG TO THE RESCUE

These three experts believe a reimbursement system for DRGs, or diagnosis-related groups, is fairer and easier to apply then a charge-based system, so long as reimbursement is not based on Medicare payments. The National Council on Compensation Insurance also likes the idea of a DRG-based schedule for hospitals.

DRGs provide for reimbursement for logical groups of services for a hospital stay. They have been the basis for Medicare reimbursement for many years.

But even a DRG-based system can be taxing. Physician-level medical knowledge is needed sometimes to understand DRG reimbursement protocol, according to Birckelbaw.

REGULATION & LAW

Sometimes disputes about reimbursement end up in state court. Quarum has found it frustrating the ambiguity in the wording of regulations when dealing with case law--even the unwillingness of judges to enforce existing statutes.

All three executives believe that state regulation can be improved. Often the regulators do not understand how their systems can enflame controversy. Birckelbaw recommended that dispute-resolution rules should force both sides to provide evidence of their case for reimbursement, with the burden of proof being on the provider.

Not all claims payers have embraced the notion that hospital bills deserve special attention. According to Beans, they often treat bill review as something of a commodity and tend to focus on PPO network contracts as the primary means to control costs.

Hospital cost inflation will be with us for some time, for sure, for one reason or more.

Read more at the WorkersComp Forum homepage.

August 18, 2010

Copyright 2010© LRP Publications