Managed Care Matters

An analysis of hospital expenses in Ohio indicates that the Bureau of Workers' Compensation paid $1.6 billion for services that cost the hospitals less than $1.1 billion to provide. The mark-up, some $544 million, has been described by various stakeholders as "a positive profit margin", "outrageous", "ludicrous", and "a cash cow for hospitals".

The basic issue is hospitals are paid a set percentage of charges, a methodology that some suggest is open to misuse, as the hospitals set the charges. Ohio's hospitals are paid 70% for inpatient and 60% for outpatient services. Scott Courtney, EVP of the Service Employees Union that conducted the study, claimed that "Hospitals arbitrarily set a price that's not at all relevant to the cost of providing care."

Both the BWC and the Ohio Hospital Association are disputing the SEIU's conclusion that hospitals are generating a profit of some 65% on workers compensation, with the Association claiming the figure is in the 15 to 35 percent range.

My own experience examining hospital data, coupled with the experience of MedNet Connect (a consulting client), a firm that works with payers to evaluate bills to assess their ‘credibility' and determine an appropriate reimbursement amount, indicates the SEIU's figures are likely more accurate than the Association's.

While this debate is certainly interesting, once again we find ourselves embroiled in an argument over health care costs that is based on price and cost, and not on value delivered.

I am also familiar with a hospital system in southern Ohio that consistently delivers low cost, very high quality care to injured workers that is focused on return to work. Their results are stunning - total medical costs reduced by over 40%, significantly faster return to work, etc. These results are delivered through an integrated care delivery model, wherein an occupational medicine physician manages each and every lost time claim, communications protocols are set up for each and every client, a physician panel specific to WC is in place, outcomes are assessed for each patient and client, and systems developed and implemented to make it all work. Expensive? Absolutely. Worth it? Absolutely. And the program's expenses will not show up in an analysis of "charge" data.

The study is helpful as far as it goes, but does nothing to assess the performance of these hospitals - performance based on cost per claim, total medical expense, return to work, reinjury rate, etc.

What does this mean for you?

Stop fighting over costs and start demanding outcomes.