Insight, analysis & opinion from Joe Paduda


Spine surgery in California – some cheese with that whine?

WorkCompCentral’s [sub req] Greg Griggs reported the Division of Workers’ Comp’s public hearing last week was dominated by providers complaining about moves to reduce reimbursement for Ambulatory Surgery Centers (ASCs) and spinal implant hardware.
I have a [very] tough time ginning up much sympathy for the ASCs.
First, a quick review. Back in 2004, California’s Division of Workers Compensation (DWC) set payment for ASCs at 120% of Medicare – identical to hospital outpatient departments. The new recommendation is to pay the ASCS at 100% of the Medicare rate.
According to WCC, several of the provider groups attending the hearing stated they would suggest/encourage their physicians not treat workers comp patients because WC is a hassle and the reimbursement cut would be too deep. There’s no question WC is more of an administrative burden than your typical WC case; dealing with UR, complaints from adjusters, employers, and injured workers, documentation requirements and potential for involvement in litigation as well as addressing return to work are all present in comp – and not in Medicare.
And that’s precisely why physician reimbursement in comp, is higher than for Medicare – the docs, and their staffs, are the ones dealing with those issues. They should be paid more – and in California, as in most other states, they are.
For facilities, it is hard to see why they should be paid more for WC cases than for Medicare – the bricks-and-mortar, tools, staff, supplies and other operating expenses are what their reimbursement covers.
To listen to the ASC owners, any reduction in comp will be catastrophic: here are a couple of their comments as quoted in WCC, with my observations interspersed:
– “the reason I built the Pleasanton surgery center is because hospitals are so inefficient”… under the new FS this physician’s three surgery centers “will have some procedures where it just broke even “and many where there would be a significant loss.”
MCM – If hospitals are “so inefficient”, how can an ASC not be more profitable at the same reimbursement as those ‘inefficient’ hospitals? There’s a logical fallacy here that refutes the physician’s own argument.
– another CEO said “we need to select those parts of the business where we could make a profit, but the reality is a 20% cut is big for any business. The brutal reality is that will impact jobs.”
MCM – with all due respect to the CEO, your profits are employers’ costs. The “brutal reality” is high workers comp costs do impact jobs – especially for employers forced to pay for your profits.
What does this mean for you?
A helpful reminder that workers comp is a zero sum game – excessive reimbursement profits providers and penalizes employers.

3 thoughts on “Spine surgery in California – some cheese with that whine?”

  1. Zero sum game? You’re kidding….right? You mention providers profiting but what about the insurer who is in business solely to make profit for stockholders? Does the CEO of a major insurer have an obligation that is more important than fiduciary responsibility to the stockholders? It is more important than his obligation to the insured or the providrs and it reeks of a motive….it’s called profit.

  2. Joe
    In 1999 I developed a statewide ASC and pain management network in CA, named COMP Medical, which was utilized by many WC payers in the state. All procedures were via active referrals into the network and none were “passive.”
    The driving force for the development and utilization of the network was the egregious abuse of the ASCs in CA by charging up to 25 TIMES Medicare’s reimbursement rate to the WC payers. This abuse was remedied by the Schwarzenegger WC reform.
    The ASCs brought up the exact same arguments in 2003 (as Joe cited above)when their rate was lowered to 120% of CMS’ reimbursement. The real economics of the issue that Joe raises is that ASCs in high rent and high salary areas have skinnier margins than do their counterparts in more remote or “cheaper” areas. But, as Joe said, ASCs do not have the additional administrative burden as do the physicians offices in WC.
    If the economics do not work for your ASC, you probably are currently not taking on any Medicare patients. The bottom line is that there is NOT a reimbursement induced ASC crisis in CA now for Medicare patients, therefore, there will not be a WC ASC access crisis in CA when the WC fee schedule matches Medicare’s rates.

  3. David – thanks for the note, and welcome to Managed Care Matters.
    You make an excellent point, one I should have noted. With that said, I’d note that the single largest insurer in California is a not for profit – SCIF. Many other ‘insurers’ are taxpayer-supported governmental entities or self-insured groups which do not exist to make a profit.
    There’s another point that bears mention – stock workers comp insurers have done a rather poor job of generating profit over the years. Their historic return on equity consistently ranks near the bottom of any industry. A significant part of their problem is certainly self-inflicted, but excessive pricing for medical services, pricing that is controlled by regulators, is a major contributor as well.

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Joe Paduda is the principal of Health Strategy Associates




A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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