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Work Comp’s Retrospective Medical Bill Review And Payment Models Are Costing Payers, Providers And Injured Workers
By Kenneth Farnham and Lonce LaMon, editor - May 4, 2017

To better illustrate the absurdity of the current, inefficient, misguided Workers’ Compensation billing and payment model for a moment, let’s open our minds to the possibilities of applying one industry’s standards to your everyday life, and explore the potential outcomes. Additionally reverse engineer the scenarios to better service the Work Comp community. 

Imagine being at your favorite local coffee shop, and you’re handed that amazingly tall mocha latte. But rather than paying cash or credit, you leave the cashier with an Explanation of Review (EOR) and let her know she will receive notice in 4-6 weeks regarding payment. 

Next you stop by the mechanic’s garage, where you’ve been taking your car for years for that much needed brake job and tune up.  When your car is ready, the mechanic shop hands you the keys, but you inform the garage that their invoice must be reviewed.  You also advise them a determination regarding reimbursement will be made to insure they are charging you usual and customary rates for the geographic area. Complicating things further, you tell them you cannot guarantee reimbursement, and that the shop owner must deal with the bill review company to contest the determination if they don’t agree with it.

You then head to the salon and meet with your favorite hair stylist. She’s an old friend who has provided you with service for years and once again she does a perfect job on your hair. When it comes time for the payment you provide a notice that there is a Bill Objection issued due to the fact the stylist forgot to rinse your hair twice after the color was put in. She can expect a review of the bill in 30 days and payment in 60 days.  In addition, the bills will only be paid per what the state policymakers deem reasonable and fair.

Nonetheless, given these scenarios, how long would these service providers continue to accept your business?  What if they had no choice and this was mandated by law? Oddly this has been the reality faced by providers, employers, cost containment companies, and the Workers’ Compensation claims staff for decades.

If you’re not at least smiling at the absurdity of this story, you’re either bald, don’t have a car, aren’t a coffee drinker or most likely work as a medical bill review coder.

Applying the Workers’ Compensation medical payment system to other industries might seem absurd and an oversimplification, but the core logic is applicable.  Although it’s clear to see the absurdity of the existing system, nothing will change if the employers or “consumers”, don’t pressure our lawmakers for enhancements in the structure.  A wonderful example of this is when cab drivers convinced some elected officials to have Uber shut down but consumers lobbied to the service’s defense.  Initially lawmakers were not adequately informed regarding the benefits of innovation and its overall benefits to consumers.  Similarly legislators in California have recently passed legislation attempting to decrease the uncontrolled costsof Workers’ Compensation.  The legislators’ focus appears to be singularly set on reducing reimbursement and premiums, rather than creating efficiency in within the system.  The short term influences don’t seem to be resolving the long term problems and have already forced some unintended consequences for the entire industry.  

Let’s point out some of these trends that are unfolding, if lawmakers and employers could see the wisdom in such a change, as both the medical and Work Comp industries react to the legislation and explore the possibilities of revolutionizing the industry.  Based on previous years and estimates, the total costs of the retrospective review and collections from the medical providers cost nearly a Billion Dollars.  Let’s look at how this is happening.


In a recent phone interview with a claims manager who spoke on condition of anonymity, the manager said, “If the fee schedule got to the point where it was so low, you’d probably run the risk of losing a lot of good doctors, who could provide better care.  Better care equals faster recovery times, less physical therapy, and ultimately lower PPD.” 

Separately, but equally impactful, is the dilemma of drastic reduction of fees for MRIs. High caliber MRI facilities likely won’t accept low ball offers from middle men care coordinators thus creating a scenario with lower quality diagnostics.  One workers’ compensation claims manager, who could not get corporate approval to be named and quoted by the Media, expressed that this could then lead to the misdiagnosis of an injured worker. A doctor could look at a poor quality MRI, read it incorrectly and see a tear.  This then could cause a surgeon to perform a surgery and then later find there is no tear.  The fee schedule for MRIs in California is down below $353.00.  Just three years ago, MRIs were set at $640.00.  

The claims manager added, “I have heard some rumblings with doctors stating that it’s getting to the point where it’s not feasible for them to continue treating work comp patients. I have seen one doctor in particular who did not want to deal with the work comp system, and stopped taking patients. That doctor was actually a very good doctor.”

In addition, more and more providers have stopped accepting referrals for specific services.  Nevada’s home health fee schedule is so low that many providers are refusing services and claims adjusters are now forced to negotiate care themselves and above fee schedule. This costs the TPA or Employer the claims staff’s valuable time.  So much of the push back from providers is that fee schedules don’t calculate the time factor of not only the claims staff but also the provider billing staff.  It’s becoming increasing difficult to collect and pay for simple service because of the complex nature of the medical bill review industry.

Recent fee schedule reductions for many of the services provided by doctors  have fallen so low that insurers and MPNs are finding it challenging to find quality participants within their networks. The drive for workers’ compensation cost containment has potentially reached a point, where the claims payers are caught in a cost-containment Catch-22.   

Wouldn’t a system where everything is done in real time and pricing is established prospectively, be more efficient than one where it’s done retrospectively?  Why do these inefficiencies continue to thrive, and why are the Work Comp and Medical Communities complacent? There was a 2009 study done by First Data that beautifully illustrates the Health Care Payment reform model.

In a 2015 article published on workcompcentral, writer Greg Jones states that the medical cost-containment expenses increased in California to $471 million in 2014 and the cost of controlling medical expenses grew 5.4% in 2014.  Those costs included legally mandated bill review expenses.

Additionally these costs do not take into account provider’s administrative costs for billing and collections, which make up 15- 20% of the total operating expenses.  In this day and age of the instantaneous and transparent cost models such as Uber, Amazon and PayPal, why should the injured workers be provided care with this type of inefficient system? What if a similar type of instant payment adjudication was applied and mandated by lawmakers in Work Comp?  Chances are the injured worker, insurer and providers would all benefit. Creating a model where trustworthy, fair reimbursement and quality care is the benchmark would greatly improve the quality of service and the system.  Some nationalized Electronic Medical Billing laws have begun to address this issues and instant medial reporting from the physician’s office would be a key component.  UB82 and HCFA1500 forms are legal mandatory standards for the providers making it easier for Medical Bill Review to review the bills but there has been nothing implemented about standardizing the EORs and making it less costly for the providers to contest an ill-advised review.
Additional frustration for the medical community has been the role of Medical Bill Review and how they are not held accountable on a number of levels.   Not only are they almost impossible to reach via phone or email to discuss or question a review, but the Independent Bill Review option is costly and slow which further delays reimbursement.    

Finally, another separate but equally important possible relief for the industries has come from the determinations in courts.  There have been successful challenges to fee schedules. A recent Insurance Journal article reported on a Florida Supreme Court ruling which determined that the state’s mandatory attorneys’ fee schedule for workers’ compensation was unconstitutional.  These small victories have arrived just in time because it is apparent there may be no end to legislative intervention.  Would a fee schedule controlling the pay of a Workers Compensation Claims Adjustor, Supervisor or Manager be a popular idea?  Food for thought., Lonce LaMon, editor, all rights reserved; copyright adjustercom


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