One area of potential cost savings that are clearly in the political crosshairs are spinal hardware costs.

The issue is currently hot a the legislature considers AB 959.

Spinal hardware costs have been under increased scrutiny since a 2005 report prepared for CHSWC by RAND, written by Barbara O. Wynn and Giacomo Bergamo, "Payment for Hardware Used in Complex Spinal Procedures Under California's Official Medical Fee Schedule for Injured Workers":
http://www.dir.ca.gov/CHSWC/Hardware_comp9.pdf

That study concluded that:
"Under current policies, the OMFS allowances for spinal surgeries essentially pay for the hardware used in spinal procedures twice: once through the DRG payment and again in the pass-through payment. Moreover, the cost-based payment plus handling provides no incentive for prudent purchasing and use of hardware. Also, there is considerable administrative burden involved in establishing the appropriate pass- through amount through pricing of each claim individually."

RAND continued:
"The data analyzed in this study does not support a continuation of the pass-through. The comparison of Medicare and workers’ compensation discharges shows that on average injured workers are less costly than Medicare patients and have a shorter length of stay. The DRG-mix adjusted Medicare cost per discharge is about 14% higher than the cost per discharge for workers’ compensation patient. Although more hardware is used for workers’ compensation patients in certain DRGs (namely, DRGs 4, 497 and 498) than for Medicare patients, shorter length of stays for workers’ compensation patients in these DRGs generally offset the added costs. The comparison suggests that the 1.20 multiplier to the Medicare payment rate should be sufficient to assure that OMFS allowances on average for complex spinal surgeries are substantially more than the cost of providing care. This does not mean that the payment for every workers’ compensation discharge will be higher than the costs for that patient. The DRG system is built on a system of averages, where some discharges are more costly than others, and the goal is to assure that on average the payment is adequate.
The results of the payment simulation are based on an overall cost-to-charge ratio and should be interpreted with some caution since hospital markups may differ for spinal surgeries. The likelihood, however, is that the payment-to-cost ratios are understated rather than overstated since hospital markups tend to be relatively high for orthopedic cases. Not unexpectedly, the results indicate payment-to-cost ratios are lower when expensive hardware is used than when it is not. However, even when costly hardware is used, the payment-to-cost ratios on average are above 1.20 for most spinal surgery DRGs. The 1.20 is comparable to the average ratio for private payors.10 The only exception is DRG 496, where the payment-to-cost ratio is 1.09. Moreover, hospitals that use substantially more hardware than other hospitals still have payment-to-cost ratios that are comparable to the overall average for workers’ compensation patients and the concern that these hospitals might be underpaid is not supported by the data. While the payment simulation results are not definitive given the limitations of the methodology, they lend further support to the conclusion that a pass-through is unnecessary to assure payments are adequate for workers’ compensation spinal surgeries.
The OMFS has adopted Medicare’s temporary add-on for quality-enhancing costly hardware. This provision is intended to assure that FDA-approved high-cost quality-enhancing new technology is recognized before the higher costs are reflected in the charge data used to establish the DRG relative weights. If desired, a higher percentage of the estimated cost could be paid for technology qualifying for the add-on. After the expiration of the add-on payment, the high cost outlier policy provides some protection for hospitals that have a disproportionate share of procedures using high-cost technology.
Any special payment policy for hardware and instrumentation should be evaluated for its likely impact on financial incentives for appropriate utilization of these products during spinal surgery and on administrative burden. There is no support in the data for continuing to pay for relatively inexpensive hardware and instrumentation that is used during spinal surgical procedures. If there is a continuing concern that the payment-to-cost ratios are lower when hardware is used than when it is not, alternatives to the current pass-through could be considered. For example, the multiplier could be reduced for most spinal surgery discharges and increased when specific high cost technology is used, such as those examined in this study. This approach would minimize administrative burden by keeping any additional payment within the DRG per discharge payment and would eliminate the duplicate payment. While it retains an incentive to use hardware and instrumentation during spinal surgery, it creates an incentive to use less costly instead of more costly products of comparable quality. Establishing a separate fee schedule for the individual products that would be eligible for special payment would improve payment accuracy but would also add the administrative burden of maintaining the fee schedule and pricing the claims."

Thus spake RAND.

But now we have the California Workers Compensation Institute weighing in, finding in a research study that current payment system for spinal hardware "pass-through payments added almost $67.5 million to the basic inpatient hospital facility fee payments for California workers’ compensation spinal surgeries."

At a time when policymakers are focused on finding ways to free up money for benefit increases for workers in a way that does not drive rates significantly higher, $67.5 million becomes an inviting target for reform.

Readers can find the CWCI study by Alex Swedlow and John Ireland here:
http://www.cwci.org/research.html

Here is a link to information about AB 959 (Lieu):
http://www.leginfo.ca.gov/cgi-bin/postq ... uthor=lieu

Stay tuned.

Julius Young
www.boxerlaw.com
www.workerscompzone.com

The Court of Appeals decision in Valdez got me thinking further about MPNs.

If reports from non-MPN doctors are admissible, will this just accelerate efforts by some attorneys and defendants to "treat on a lien", accelerating the lien problem that plagues California's workers' comp system, particularly in the Los Angeles area?

Clearly Valdez tells us that if all of the MPN doctors are dismissive of my problem, I can contract with a doctor of my choice, get an MRI or lab tests to show that I do in fact have the problem, and have my doctor's report deemed admissible.

Now, if I have the ability to do that, does that eviscerate the process of second and third opinions in the MPN and the little-used MPN independent review process?

If I have a pool of doctors willing and able to treat on a lien, then I might try to "gain medical control".

Part of the problem here which is at the root of so many lien disputes is the issue of when a worker must treat within the MPN in order for the treatment to be paid.

Savvy applicant attorneys have scoured the MPN statute and MPN regulations in order to come up with checklists of dozens of MPN requirements.

If you look hard, in many cases there may be non-compliance with some of these rules.

In some cases the violations may be serious. A selection of doctors is not available within a reasonable distance of the applicant's residence.

Or take the circumstance where the defendant fails to send the MPN doctor list after it is requested. An en banc case, Knight v. UPS, allows applicants to treat outside MPN at defendants expense in such a circumstance.

But what is not clear is how the board really intends to deal with the myriad other circumstances where there may be MPN technicalities that are not met. What are de minimis violations and what are substantive violations of the MPN regs? When is retrospective compliance sufficient to recapture the worker in the MPN? although there may be some WCAB panel decisions addressing this in certain circumstances, there is a lack of clear bright line rules that parties can rely upon.

And how do these issues about MPN applicability get officially determined?

In many instances, it's "off to the races" with treatment on a lien when the applicant believes there is non-complicance with the MPN rules. And thus a lien dispute issue is generated, an issue that may be sorted out years later.

What would help is if there is a fast track to resolve issues about whether one is required to treat within the MPN in order to have the physician paid.
An early determination resolution process on these issues would probably benefit all concerned. Moreover, it would encourage the board to clarify the standards for allowing treatment outside the MPN at defendant's expense.

Valdez tells us that a worker will always be able to contract for their own treatment. The question with that will be whether the doctor is entitled to be paid. Probably not if there was a valid MPN unless the worker exhausted the MPN process.

And there will always be use of non-MPN doctors where defendants have denied a claim or have admitted certain body parts were injured but denied other body parts alleged. those cases will not be amenable to fast tracking.

But fast tracking more routine MPN-coverage issues would be helpful.

Dealing with this should be at the heart of any future reform discussions.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

The wait for a ruling in Valdez is over.

The California Court of Appeal, Second District, Division 7 has spoken in Elayne Valdez v. WCAB and Warehouse Demo Services. The Court reversed a WCAB holding that precluded use of reports from non-MPN treating physicians under all circumstances.

In Valdez the worker treated briefly with MPN physicians but was thereafter directed by her attorney to a non-MPN physician.

The circumstances as to whether the carrier had met its MPN requirements remains unclear. As the Court of Appeal noted:
"Whether petitioner was actually informed of the MPN and the need to treat with physicians who were a part of the MPN are therefore contested issues. In light of our disposition of the petition, however, we need not address and resolve these issues; they remain to be resolved on remand."

In reaching its decision the Valdez court focused on Labor Code 4616; deciding that:
"We conclude that the rule of exclusion laid down by section 4616.6 applies only when there has been an independent medical review performed under the authority of section 4616.4. We therefore annul the decision of the WCAB and remand with directions for further proceedings that are consistent with this opinion."

The Court reaffirms that :
"If the Legislature intended to exclude all non-MPN medical reports, the Legislature could have said so; it did not."

Further, the Court of Appeals says:
"The WCAB noted that, as in Tenet, the employee was not free to ignore the dispute resolution mechanisms of sections 4061 and 4062. However, as is apparent, Tenet does not support the conclusion that “[a]ccordingly, the non-MPN reports are inadmissible to determine an applicant’s eligibility for compensation.”The statutory scheme does not exclude from consideration medical reports prepared by non-MPN physicians, but in fact provides that medical reports prepared by the employee’s treating physician may be submitted to the qualified medical evaluator.There is no statutory requirement that the employee’s treating physician be part of the employer’s MPN. Rather, the statute provides that medical records “relevant to the determination of the medical issue” may be provided to the qualified medical evaluator. "

Moreover, the Court notes:
"Our conclusion is buttressed by the employee’s undoubted right to contract with physicians of his or her choice. A rule excluding medical reports by such physicians for the sole reason that the report was not prepared by an MPN physician would eviscerate the right guaranteed by section 4605."

Technical statutory interpretation questions aside, what does this mean as a practical matter?

There are cases where, for a variety of reasons, workers treat outside the MPN. To exclude reports in many of those cases would be to ignore important information on diagnosis and treatment progress.

After the WCAB issued its opinion in Valdez I had noted that the rule it enunciated was overly harsh and unlikely to withstand scrutiny.

That has now come to pass.

But if attorneys seeking to take "medical control" and doctor mills see this case as a green light to circumvent MPNs, I think they misread the case. Reports from non-MPN physicians may be admissible in proceedings and reviewable by QMEs/AMEs but whether the non-MPN physician will be paid is another matter. So I would not read Valdez to say that attorneys can routinely "take control" by circumventing a validly noticed and maintained MPN.

But there's a fine line there if non-MPN reports are admissible. So the case goes back to the WCAB on the MPN issues.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

If there is one thing that leaves injured workers frustrated, it's the procedures that frequently result in treatment denials.

Between 2005 and 2010, medical cost containment expenses almost quadrupled. That includes expenses for utilization review and bill review.

Insurers assert that without cost containment procedures, medical treatment costs would be even higher, resulting in unsustainable premium increases.

The chorus of complaints about UR is particularly loud from workers who settled cases years ago and were awarded "future medical" as part of their case resolution.

From the employee's perspective, they bargained for medical as part of a settlement or as part of a court award. Not only may they be required to change doctors to a new physician on an employer network. Now they find that almost everything that is prescribed is either delayed or denied.

So the worker who had been represented years ago calls his former attorney, asking for help.

In some instances, the worker may find that his attorney has retired. But even where the attorney is still in practice, the worker may have trouble obtaining help.

The attorney is busy handling current cases. While some attorneys will get involved in treatment denial issues for clients whose cases were handled years ago, others simply are not staffed to take on these issues as a project unless they can be paid for doing so.

The problem here is that under current law, attorneys representing injured workers are not compensated in most situations.

An attorney who decides to help fight treatment denials may expend a substantial amount of time and effort on UR appeals. Time spent talking to the client, tracking down the medical reports and UR paperwork. Analyzing time frames to see if UR time limits were observed. Using the QME process to appeal denials. Possible court appearances.

And even if there's a victory for the worker, the victory may be on one treatment issue.

But this may be repeated again and again with ongoing treatment issues for this worker.

And that's only one worker.

Many applicant attorneys have represented thousands of workers over their career. So it's not hard to see why some applicant firms limit their involvement in challenging treatment denials. There simply are not enough hours in the day for many firms.

And that's probably fine with many insurers, who are happy that attorneys are not incentivized to fight denials on behalf of workers.

This is the problem that AB 1687 (Fong) seeks to address.

AB 1687 would require that when injured workers are given explanations as to why the insurance company modified, delayed or denied medical services, they also be given a description of available options to appeal such a decision.

Furthermore, AB 1687 would allow attorneys to be compensated a reasonable fee for their efforts on behalf of injured workers to enforce previously awarded medical treatment.

Supporters of the bill include the California Professional Firefighters and the California Labor Foundation.

The bill has already cleared the California Assembly Insurance Committee and the Assembly Appropriations Committee.

But with Governor Brown's likely unwillingness to sign piecemeal workers' comp changes, the bill's future may depend on what occurs later this year with other components of workers' comp reforms.

Here is a link the current text of AB 1687:
http://www.leginfo.ca.gov/pub/11-12/bil ... sm_v98.pdf

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com

Do ambulatory surgery center owners do more surgery? If so, is that bad?

What are the implications for workers' comp?

On an anecdotal level, I recently had minor hand surgery at an ASC. The facility was incredibly efficient, with far less bureaucracy than I had experienced with even more minor procedures in a hospital setting.

In looking at the list of the doctors who own the facility and who practice there, I noted that many of the top orthopedic surgeons in the area were participants. Many of these are docs whose integrity and clinical judgment I greatly respect.

But a recently released study by the Workers' Compensation Research Institute of Cambridge, Mass. attempts to document a pattern of increased surgical utilization by owners of the centers.

Time will tell whether the statistical research done by WCRI on these issues holds up. The data studied was from Florida during 1997 to 2004, focusing on arthroscopies and carpal tunnel surgeries.

The study begins by noting that:
"Some studies have found that surgeon owners of ASCs perform more surgeries than surgeons who are not owners (e.g., Mitchell, 2010; Hollingsworth et al., 2010; Gabel et al., 2008; Lynk and Longley, 2002). These studies raise a concern about potential conflicts of interest that may influence treatment decisions and be inconsistent with high priority national goals of containing the rising costs of medical care while maintaining quality care."

The study, by Christine A. Yee points out that:
"In 2011, legislation was passed in California prohibiting doctors who own many kinds of medical businesses from referring their workers’ compensation patients to those businesses, or from using products from those businesses in their practices.2 This law, effective January 1, 2012, requires physicians who own these types of businesses, including ASCs, to inform insurers of their ownership. However, the law allows physician owners of ASCs to send patients to their own ASC for surgery, with payor preauthorization. Previously, California allowed self-referrals to ASCs, yet prohibited self-referrals to other types of entities."

Why do owned of ASCs do more surgery? There appears to be a recruitment effect, so that doctors who do lots of surgeries tend to buy into ASCs. Also, the study finds that surgeons can do more surgeries in ASCs, which are more efficient. Another reason claimed by the study are financial incentives. Yee claims that:
"They increased their surgery volumes by 14 to 22 percent due to the financial incentives, or 15 to 25 surgeries per year for the average surgeon who became an owner—compared with the number of surgeries that each of these surgeons performed prior to becoming an owner. This effect explained 14 to 21 surgeries in the difference in surgeries performed per year between owners and non-owners, or 18 to 33 percent."

Another factor was improvement in medical technology.

The WCRI charges that ASCs have tended to increase workers' comp volume:
"Relative to the types of patients they would have treated had they not been owners, ASCs provided more surgeries to patients covered by workers’ compensation, commercial indemnity insurance, and Medicare. These payors were higher-paying insurers at the time of the data. Due to owner financial incentives, the average surgeon increased the number of workers’ compensation patients by 17 to 23 percent and the number of patients with commercial indemnity insurance by 20 to 51 percent. Surgeons did not increase the number of patients covered by Medicaid and certain health maintenance organization (HMO) plans."

It is important to note that the WCRI study does not claim that the surgeries that were done were not necessary or that the surgeries had bad outcomes.
Specifically, the study says"
"This study did not address whether any of the additional surgeries (due to financial incentives, increased capacity from expanding one’s network, or ASC efficiency gains) were necessary or not. We also did not address whether they were cost-effective or not. If medically necessary and cost-effective, then increasing surgeon ownership would have improved access to surgical care for those who previously did not have access, in particular, those covered by workers’ compensation, commercial indemnity insurance, and Medicare. If the surgeries were not all necessary, then increasing surgeon ownership would be a cost driver and merit increased regulatory attention. This question deserves additional research using data on patient outcomes."

The WCRI study makes various general recommendations for payers and policymakers but notes that ASCs have many advantages, including costs.

Concluding, the WCRI study notes that:
"We speculate that physician ownership and the role of ASCs will become a bigger issue for injured workers and workers’ compensation payors in the next decade. The use of ASCs for orthopedic services and pain management services is growing rapidly (Koenig et al., 2009). ASCs may become as dominant a setting for services treating musculoskeletal and nervous system conditions as they are for eye surgery and gastroenterology today. Management companies of ASCs indicate orthopedics as the most desirable medical specialty in which to do business (Fields, 2011). Since many injured workers today are treated with these types of services, we may expect the issue regarding physician ownership of ASCs to receive more attention by regulators that oversee workers’ compensation systems in the future.
The efficacy of current policies intended to counteract adverse effects of physician ownership has not been determined. The optimal policy would curtail any adverse effects, while encouraging medical innovation focused on producing high quality and cost-effective care."

Wonks out there may want to download the study, which is chock full of data and graphs. (available for a fee) off of the WCRI website:
http://www.wcrinet.org/studies/public/b ... urgery.pdf

Stay tuned.

Julius Young
www.workerscompzone.com
www.boxerlaw.com