Florida's hospital costs - bad to worse
As I noted yesterday, Florida is considering a change to the fee schedule that would increase work comp medical expenses by a full 20%. The change, basing reimbursement for work comp outpatient procedures on what hospitals bill Medicare, would double workers comp payers' outpatient hospital costs. (Workers comp is already the best payer (by far) for Florida's hospitals, with margins exceeding 55%.)
To understand why, here's a brief background on the facility reimbursement situation in the Sunshine State. Florida's fee schedule calls for most outpatient services to be reimbursed at 75% of 'usual and customary' charges; outpatient surgical services are paid at 60%. The obvious question is: what is 'usual and customary'. Turns out that there is no agreed-upon standard in Florida, a situation that has led to numerous disputes between payers and providers. In an effort to fix this, the regulators are seeking to establish a uniform standard - albeit one that would double already-high outpatient prices.
According to an analysis done by FairPay Solutions (an HSA client), 55% of workers comp costs in FL are billed on UBs (hospital billing forms). 44% of those costs are for hospital outpatient services - or about 13% of total costs. Increasing 'usual and customary' costs by almost 200% (FairPay's estimate based on FL Medicare charge and payment data) will dramatically increase medical costs.
That's bad. But it would get worse, quickly.
Florida hospitals raise prices around 15% annually. There's nothing to stop them from continuing this practice, and as the proposed FS change would base reimbursement on charges, not payments, they are actually incented to push prices even higher.
Expect physicians to start seeing patients in hospital exam rooms as well. Why? Reimbursement - an additional $290 for each visit.
Next we'll consider why Medicare should never be used as the basis for WC reimbursement, and we'll conclude by looking at two markets - Miami and Orlando, (already the poster children for excessive hospital utilization) and consider the impact of this potential change on costs in the two large markets.