The Ohio Bureau of Workers' Compensation announced that it will be significantly reducing reimbursement to hospitals . Cuts will be 21% for inpatient and 17% for outpatient services, and are slated to go into effect October 1, 2005.

Estimates of savings to BWC are about $3.3 million per month, or $40 million a year.

The cuts were the direct result of an analysis performed by a major union in the state which indicated hospitals' most profitable line of business was workers comp. Previously, reimbursement was 70% of a hospital's stated charges for inpatient admissions; the new rate will be 55% of charges. Outpatient rates would drop from 60% of charges to 55%.

While one has to applaud the quick action by BWC, an entity that has never been known for fast action, cutting reimbursement that is based on a percentage of charges is a highly suspect way to reduce expenses - what, if anything, prevents hospitals from increasing their charges?

Moreover, this is an across the board cut, and does not reflect any measure of outcomes, efficiency, or results. Thus the hospitals that have excellent results and performance suffer the same cuts as poorly performing hospitals.

Once again, a blunt instrument employed in the name of cost control.