Sunday, June 14, 2015

Medical Costs, Fee Schedules, Disparate Reimbursement, and Medical Tourism

In February, NewsOK reported on the disparity between various charges for medical services in New Hampshire. It reports that an injection for a work injury could cost $763 while the same injection is only $298 if not work-related. A surgery for "tendinitis in the shoulder costs about $2,300" if work-related compared to $768 otherwise. These are figures gleaned from New Hampshire and evidence workers' compensation paying two and one-half to three times more for medical treatment.

It is not the first time that we have seen disparity reported.

In 2013, the federal government finally agreed to disclose details on what has been charged "for the 100 most common procedures." The Washington Post reported "these charges have been closely held by facilities that see a competitive advantage" in the fact that other facilities did not know what they were charging. The Post concluded that this resulted in a "health-care system with tremendous, seemingly random variation in the costs of services."

The figures in the Post story evidence these variations. For some procedures, the billed charges for one hospital were almost double the charges at other facilities. Inexplicably, the government reimbursed some facilities between 17% and 39% more in the examples cited. More inexplicably, it appears that facilities that billed more actually got paid less.

More data still was released in 2014, leading to some other interesting discussions.

The allegations have been made in Florida workers' compensation also. In April 2014 my posts questioned why surgery costs roughly double in workers' compensation claims. Senator Hayes noted last year that an average outpatient knee surgery in workers' compensation cost about $8,411 compared to $4,200 for non-work-related surgery.

Recently Julius Young blogged on "cost-shifting in workers' compensation." I read his thoughts with interest. Is the disparity between workers' compensation care and treatment and the cost for that care outside of workers' compensation somehow an issue of "cost-shifting?" Is the employer community subsidizing care that providers or facilities provide to non-workers' compensation patients?

Richard Krasner writes a blog titled Transforming Workers' Comp. He loyally advocates for medical tourism. The concept is simple enough, send the patient where the care is delivered inexpensively. This is most often advocated in terms of foreign countries. Of course there has to be a corollary to that, the savings has to result from efficiency or comparative advantage and not from lax standards or sub-par oversight.

There have been stories about foreign clinic closures after tragedies. One recently involved a plastic surgery facility in Mexico. It was not the first.  Mr. Krasner's blog addresses many concerns and questions that may be involved in medical tourism in the workers' compensation process.

There is an inevitability that regulation will be different in various jurisdictions. This is not an international reality any more than it is a domestic one. For example, Florida has a workers' compensation medical care fee schedule. It is mandated in 440.13. There are other states, however, that do not have a fee schedule, such as Virginia. 

The diversity of thought on fee schedules is intriguing and often provides for animated conversation at national gatherings such as the annual SAWCA Conference. Virginia has been heard to proclaim that there is no need for medical fee schedules, but WorkCompCentral reported in May that Virginia is studying the subject again. 

Where does all this lead? The inevitable destination is that information can be a powerful tool. It is clear that costs for medical procedures are different depending on location. This may be between facilities in the same town, between your hometown hospital and one in the next city or state, or between hospitals in the United States and elsewhere. Logically, people will ask questions about whether the cost differences in any particular scenario have any relation to safety and regulation, or quality of care, and the answers in a particular case may appropriately influence the analysis. 

But with the information regarding the cost of particular care among local hospitals or providers, can better decisions be made? If medical tourism is a (I did not say "the") solution to medical cost issues, would it make sense for the systems to look at it in a micro sense? That is, before one considers a trip to Mexico for care, might an injured worker in Philadelphia obtain identical care less expensively under relatively the same regulatory protections of care quality by travelling over a bridge to New Jersey, or vice-verse? 

Might the same or greater savings be accomplished with a trip from New Jersey to Florida, or vice-verse? Though there are some discussing medical tourism in terms of foreign countries, it does not seem to be taking off. With the increase in available information regarding charges and payments right here in the U.S., will there be more effort at seeking cost-effective providers and facilities? Will it result in shifting care within counties, within states, or will it go international?

There will be much more discussion of medical cost drivers, fee schedules, disparate fees, and medical tourism. But the news tells us that the subjects of medical cost and fee schedules are a "hot topic" from various perspectives. Over the next year, this will include discussion of Virginia adopting a fee schedule and states like  Arkansas, California, and Maine discussing adoption of closed formularies. Will further regulation be an (note, again I did not say "the") answer to the cost issues?

Some control issues are within the reach of the marketplace. Certainly a carrier cannot impose a closed formulary unilaterally, but with a pharmacy benefit management (PBM) process, significant control of prescription costs is possible. Through careful selection of facilities for surgery and other services, based on the knowledge of which facilities charge what, similar cost control may be possible through carrier action. 

Some will question whether state regulatory action is needed when the marketplace already has such tools available. Others may question why states would not regulate in order to bring marketplace uniformity. The questions are interesting and the development of how the data is put to use will be watched curiously. 

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