Those damn facility fees

If you are a work comp payer, you don’t have to pay those ridiculous facility fees when care is delivered outside the hospital – at least not in Pennsylvania.

That’s the decision rendered by the Pennsylvania Bureau of Workers’ Compensation in a case dating back to 2017. The case arose when a hospital (which I promised not to identify) tried to get reimbursed for care delivered by an affiliated provider, which was NOT “located within XXX hospital”.

The details

The hospital, a “Part A provider and billing entity” didn’t provide the billed services, rather a

“part B provider whose clinic [was] not located with[in] XXX hospital performed, billed, and was reimbursed for services.  XXX hospital is not entitled to payment as XXX hospital provided no medical services…”

The actual provider – a “part B provider” affiliate of XXX hospital, delivered the services, submitted a bill and supporting documentation, and was reimbursed.

The hospital also submitted a bill along with documentation that the treating provider had a professional services agreement (PSA) in place with the hospital.

Notably, the PSA “designates that all care and treatment is rendered by [the affiliate’s] personnel, therefore the payer’s attorney questioned exactly what XXX hospital was “providing.”

There’s a LOT more to this; location codes, provider details, Medicare regulations, bill types and the like are all important. The knowledge level required to correctly reimburse and successfully uphold a denial of payment for facility fees in PA is quite impressive; the entity providing that expertise has a wealth of experience and expertise in the Keystone State.

The cost reduction is equally impressive .

What does this mean for you?

  1. If you are paying facility fees for care delivered outside of a hospital (Part A) provider, you better get your act together.
  2. Expertise is way more important than price or throughput.


Medical cost drivers in work comp – NCCI’s take

Sean Cooper and Raji Chadarevian delivered perhaps the most useful presentation I’ve seen at any NCCI Conference…There’s a LOT 0f important – and very timely – information in their presentation, so I strongly encourage you to watch it  – or watch it again here.

Let’s start with the top line – facilities and physicians (which includes physical medicine as well as MD costs) are by far the biggest chunk of spend. Note that NCCI reports annual drug spend is down to 7% of total spend. This aligns closely with what I’ve been reporting for some time.

The key takeaways…

The discussion focused on medical prices – which are the single biggest driver of total US healthcare inflation (see here for more details on this) – and utilization. Disaggregating cost increases provides/ed the audience with a deeper understanding of drivers – well done.

We are approaching network saturation.

Fully 75% of Physician services were delivered in-network – and, as in-network prices grew much more slowly than non-network, this helped reduce overall medical inflation.

Physical medicine is increasing…which is good.

The cost of physical medicine has been increasing while costs for surgery costs have not. What’s driving PM costs is mostly more utilization – indicated by the light green shading below. That is NOT necessarily – or even likely – a bad thing…A course of PT is way less expensive than the costs associated with a surgical episode. 


Sean noted facility costs have been “the biggest driver of increased medical costs in workers comp” – increasing twice as fast as physician services. (Long-time readers will recall I’ve been banging on this drum ad nauseam.)

There are a host of reasons for this – led by consolidation in the healthcare services industry (also covered in detail here at MCM). Net is when a hospital or health system buys physician practices, it gets to add a facility charge to the what used to be just a physician office bill.

Voila!  Instant profit simply by changing the “place of service”. That’s why private equity firms, large health care systems, UnitedHealthGroup, and dominant hospitals have been snapping up physician groups – they are gaming the system.

There’s more to unpack here – which I’ll do early next week.

What does this mean for you?

It’s facility costs.


Facility costs…more bad news

Here’s two things which will likely increase facility costs.

Becker’s reported last week that so far this year hospital and health system margins (with some very notable exceptions) are pretty crappy – down almost 12 percent month over month in February, and a whopping 42% below February 2020 (jsut before COVID).

My bet is significantly higher staffing costs are a major contributor; the giant Henry Ford system said labor costs were up 8% in February over the same month in 2021; Providence’s increase was even higher at 10%.

Couple that with a steep drop-off in health insurance coverage as COVID-related medicaid coverage ends, and you can expect facility costs to jump.

That’s because we’re going to see a lot more uninsureds seeking care at hospitals.

Medicaid is likely the single largest payer today, with about one out of every four of us covered by Medicaid.

The problem will be especially acute in states that have not expanded Medicaid – if your members/insureds/injured workers are in the orange states, you’ve already been paying a hidden tax to help pay for uninsured care delivered by hospitals.

Since states can pretty much determine who gets Medicaid, the problem is even worse in places like Mississippi that have long restricted Medicaid coverage to a very thin slice of the poor.

If you make more than 27% of the federal poverty level, you’re too rich to get Medicaid in Mississippi – which is both the poorest and sickest state in the nation.  (kudos to Louise Norris for her intel on the issue)

What does this mean for you?

Success favors the prepared. If you think you’ve got an answer to this you’re likely wrong. 


A nurse was convicted of “reckless homicide and impaired adult abuse” after she inadvertently – and unintentionally – injected a patient with the wrong drug. RaDonda Vaught faces six years in prison

I’m pretty angry about this – and that anger is NOT directed at Ms Vaught, but rather at a grandstanding prosecutor, a negligent hospital, and a healthcare delivery system that is far less than honest with its workers and patients.

The death occurred when Ms Vaught gave Ms Murphey vecuronium instead of Versed. Sources tell me that vecuronium (a medication used as part of general anesthesia to provide skeletal muscle relaxation during surgery) is a significantly more powerful relaxant than Versed (a benzodiazepine, similar to Valium).

Okay, here’s the reality.

  1.  Medications are accessed via a secure cabinet which requires multiple steps to dispense a drug. Omnicell – the cabinet used by Vanderbilt did not have some controls that would – in all likelihood – have prevented the error.
  2. There’s no question Vaught overrode system controls – but she did so because she did not know that the drug prescribed – Versed – was only available in the generic form – midazolam – from the Omnicell cabinet. Vaught also did not know that midazolam was the generic form of Versed.
  3. Instead Vaught typed “Ve” in the cabinet’s search function – and the cabinet’s electronic system responded with vecuronium. Vaught then selected vecuronium and administered it to Murphey.
  4. The prosecutor said Vaught’s decision to override the control was central to obtaining an indictment.

In fact thousands of nurses do this – override an automated dispensing cabinet’s built-in controls – hundreds of thousands of times every year. Vaught is one of thousands who have to make decisions when the doctor’s orders aren’t easily followed – or followed to the letter. Instead they have to use their judgment.

From the Institute for Safe Medication Practices:

The hospital where RaDonda worked allowed nurses to remove certain medications via override, and it is highly likely that, prior to this event, midazolam and vecuronium had been removed from an ADC via override in this hospital. Also, it is unlikely that nurses, including RaDonda, perceived a significant or unjustifiable risk with obtaining medications via override. In fact, removing certain medications from an ADC via override is an accepted risk in healthcare and one that many practitioners take to provide care to their patients. [emphasis added]

Vaught reported the error – as is common practice – with the understanding that doing so would not result in legal action against her.

Again the ISMP:

Criminal prosecution has worrisome implications for safety. It can inhibit error reporting, contribute to a culture of blame, undermine the creation of a culture of safety, accelerate the exodus of practitioners from clinical practice, exacerbate the shortage of healthcare providers, perpetuate the myth that perfect performance is achievable, and impede system improvements.11 [emphasis added]

Vanderbilt University Medical Center selected and installed and trained staff on the Omnicell cabinet – a decision that was directly responsible for Murphey’s death. From KHN:

A lead investigator in the criminal case against former Tennessee nurse RaDonda Vaught testified Wednesday that state investigators found Vanderbilt University Medical Center had a “heavy burden of responsibility” for a grievous drug error that killed a patient in 2017, but pursued penalties and criminal charges only against the nurse and not the hospital itself

Vanderbilt took several actions that resulted in the medication error not being disclosed to the government or the public, according to county, state, and federal records related to the death. Vanderbilt did not report the error to state or federal regulators as required by law, a federal investigation report states. The hospital told the local medical examiner’s office that Murphey died of “natural” causes, with no mention of vecuronium,

Reality is Vanderbilt avoided criminal responsibility and Vaught gets the blame.

If you object to this, please sign a petition to ask the court to grant RaDonda clemency. (Thanks SW for the head’s up)

From Hospital Watchdog

Finally, there’s this.

Prosecutor Brittani Flatt’s closing argument included this reprehensible statement:

“RaDonda Vaught probably did not intend to kill Ms. Murphey, but she made a knowing choice,” [emphasis added]

What absolutely ignorant and inflammatory bullshit.

Flatt’s statement implied that Vaught might have intended to kill Charlene Murphey, a statement that has no basis in fact, was completely contradicted by everyone involved, and is incredibly insulting to Vaught. Flatt should disciplined for her egregious statement.

Moreover, there’s no evidence Vaught made a “knowing choice”, in fact just the opposite – unless the “knowing choice” she made was to circumvent controls built into the drug cabinet, a “choice” she and thousands of her fellow nurses make every day.

What does this mean for you?

Medical professionals will be a LOT less likely to report errors.

Another clear sign that our health care system needs major overhaul.

Don’t go to Vanderbilt University Medical Center.

reminder – tomorrow is April First.



WCRI #4 – Provider consolidation’s impact on workers’ comp

Is Not Good.

that’s the primary takeaway from Bogdan Savych PhD’s presentation at WCRI’s annual conference– and a lot of other work I’ve done on the topic.

Consolidation eliminates competition – although I’d posit there’s little true competition in health care services. [I’ve written a LOT about  consolidation and the impact thereof]

There’s solid evidence that consolidation actually leads to increased prices and some research indicating it leads to decreased quality.

So how has healthcare evolved – well, primary care docs shifted from mostly solo practice to employment by health systems or group practices. Note this data is from 2018; consolidation has accelerated since then.

Of course, like everything else in healthcare, it’s local…orthopedic practices in Wisconsin are much more likely to be owned by health systems than those in Delaware.

Dr Savych’s research hit on a critical issue – exactly how many workers’ comp patients do primary care docs see? – the answer is most see almost none – with just one out of every ten physicians seeing more than 10 WC patients per year. Of course orthos see more – but still not many; only about a third see more than 10 claimants per year.

There are a whole host of issues with this which we’ll get into in a future post. For now, the net is researchers have to identify the specific physician responsible for the care of and outcomes for specific patients – which is fiendishly difficult especially when that physician moves from a group practice to employment by a health system. Provider identification is the main challenge – but by no means the only one.

Case mix adjusting – the art of comparing patients with similar diagnoses (often primary, secondary, and tertiary) over time – is as or almost as hard to get consistently right.

All that said, Dr Savych noted that cost increases are due more to a shift in the volume and type of procedures than higher prices for individual services.

The initial takeaway (there’s a LOT more research and analysis to do) is vertical integration (physician practices absorbed but health systems) leads to docs providing more expensive services.

What does this mean for you?

Consolidation raises work comp medical costs.

The best way to think about this is on a state-specific basis; understand where there’s more consolidation and watch the type of services delivered to your patients like a hawk.


Work comp’s moving to electronic payments…

When was the last time you wrote a check?

When was the last time you manually deposited a paycheck?

When was the last time you bought stamps?

The world is switching to electronic payments – they are wholly secure, incredibly cheap, and super efficient. Yet some work comp payers are still writing checks and mailing them to providers, while others that have begun the journey are still mailing thousands of checks and EOBs every week.

Given work comp’s top challenges – declining premiums and fewer dollars and fewer resources for administration, and the ease of adopting e-payments – makes zero sense.

Paying providers is one of those “have to get it right” things that suck up resources and staff time. The challenges are many –

  • ensuring the provider’s banking info is exactly right
  • fraud prevention
  • postal challenges
  • tying the EOB to the payment
  • producing and delivering 1099s
  • answering provider questions about payments

In group health and governmental programs, electronic payments are fast becoming mandatory.

Aetna, United Healthcare and other giant payers are mandating electronic payments for their providers…as work comp accounts for less than 1% of total US healthcare payments, payers that don’t/can’t pay electronically  will find their costs going up and provider relations suffering.

Join me next Friday March 18 for a webinar on electronic payments and work comp – free registration is here; California CLE and claims credits are available. Hosted by WorkCompCentral, Change Healthcare’s Bill Barbato and I will dive into:

  • how to evaluate the impact of e-payments on costs and margins,
  • what you should expect from your e-payment vendor;
  • how e-payments get implemented;
  • why providers want e-payments, and
  • how paying providers can generate revenue.

Change Healthcare – formerly Emdeon – is the industry leader in electronic payments…

What does this mean for you?

With declining premiums adding pressure to admin expenses, electronic payments are a must-do.

Change is an HSA consulting client.



My apologies for the previous attempt to post this…a picture in the post somehow blocked the view of the body of the post.

What’s the deal with long-term COVID?

Why are facility costs increasing and where?

How will labor market disruptions affect work comp?

These and other questions will be addressed in Boston March 16 and 17 at WCRI’s Issues and Research Conference. I caught up with WCRI CEO John Ruser and Communications Director Andrew Kenneally to get the scoop.

remember these days…?

[Register here…don’t put it off as this often sells out]


26 months into the COVID era we know a lot more about the short-term health impacts of COVID (and associated medical costs and duration) but we’re only starting to understand how COVID infections affect us – and may impact work comp – over the long term. Dr Ruser noted the:

“majority of COVID claims are short duration and most don’t have medical expense, things that are going to surprise us may well be long covid associated (issues)…(we are) doing studies on covid claims and persistence in terms of services provided that WC payers are covering”

Denise Algire, Dan Allen, and Craig Ross DO are the panelists for a discussion of the workplace “after” COVID; mandates, return to worksites, and medical care are all on the docket. [I’m not sure there will ever be an “after” COVID; more likely we’re entering a “COVID era.”]

Facility costs

WCRI’s members have identified facility costs (inpatient and outpatient hospital and ambulatory surgery facility) as a key concern; one of the biggest drivers is provider consolidation.  Dr Bogdan Savych and Dr Sebastian Negrusa will discuss their research into the effect of provider consolidation on workers’ comp medical payments; Dr Ruser:

WCRI’s stakeholders raised this as a top issue…there will be some eyebrows raised as there hasn’t been research on the impact of vertical and horizontal integration’s effect on workers comp. We will discuss the implications for costs from both vertical integration and the acquisition of Primary care practices by larger health systems.

More on this issue here here and here.


The estimable Dr Bob Hartwig will educate and engage as only he can. Somehow Dr Hartwig manages to make the densest of topics relevant and entertaining. With employment a key driver of all things workers’ comp;

“disruptions in labor markets are going to have lasting impacts on the way we work and on workers’ comp claims. Bob Hartwig is coming to talk about these disruptions and their implications for workers’ comp”

What does this mean for you?
All in all, a festival of facts, a cornucopia of content,  await us in Boston…along with a most-needed opportunity to see old friends and, dare I say…shake hands?


Hospital CEO pay ≠ Outcomes

An excellent piece by Merrill Goozner highlighted – among other things – the disconnect between not-for-profit hospital CEO pay and their hospital’s ability to control costs. 

Merrill cited the Lown Institute’s analysis of hospital performance, DEI results, outcomes, cost and pay equity

Since 1996, hospital costs have risen about 2 1/2 times faster than overall inflation…


Quoting Merrill..

You’d think the boards of trustees at the nation’s non-profit hospitals, which account for 80% of all staffed beds in this country, would be up in arms over top management’s inability to keep prices and thereby patient costs under control. At the least, they might want to incentivize their chief executive officers and other C-suite staff to take cost control seriously.


up to 40% of a CEO’s bonus depended on measures that directly affect hospital finances.

Not for profit hospitals are a BIG part our healthcare problem; most don’t care about rising healthcare costs, and they don’t tightly link CEO compensation to clinical outcomes.

Now I know why I had to pay $355 for ear wax removal.

What does this mean for you?

Hospital leaders’ and their boards’ priorities are not ours. 

Subscribe to Merrill’s posts here.


(Most) private insurers aren’t controlling costs

The prices private insurers have paid to hospitals and physicians have increased much faster than prices paid by Medicare and Medicaid.

And it’s not because providers are cost-shifting.

Those are the main takeaways from a just-released CBO report; here’s what CBO said (emphasis added):

  • commercial insurers pay much higher prices for hospitals’ and physicians’ services than Medicare FFS does.
  • In addition, the prices that commercial insurers pay hospitals are much higher than hospitals’ costs.
  • Paying higher prices to providers can have several effects.
    • First, it can increase insurers’ spending on claims, which may lead to higher premiums, greater cost-sharing requirements for patients...
    • Second, it can increase the federal government’s subsidies for health care .
    • And third, it can slow the growth of wages.
  • The share of providers’ patients who are covered by Medicare and Medicaid is not related to higher prices paid by commercial insurers. That finding suggests that providers do not raise the prices they negotiate with commercial insurers to offset lower prices paid by government programs (a concept known as cost shifting).

Ok, that said, these are findings based on national data…things are different market to market.

I’d note that price increases in workers’ comp correlates with states’ Medicaid expansion. That is, price inflation is generally much higher in states that did NOT expand medicaid.

More on that here.

What does that mean for you?

Private insurers aren’t doing their job very well.



Our healthcare system is breaking – part 2

Earlier this week I wrote the first in what is likely to be a wholly dispiriting series of posts documenting the decline of our healthcare system.

Make no mistake, in many areas it is coming apart at the seams. While the causes are many, there’s no question COVID has both sped up and steepened the fall.

Healthcare job vacancies are twice the historical high, with one out of every ten jobs unfilled. We are missing about 1.9 million nurses, doctors, technicians, administrators, lab techs, therapists, nutritionists, counselors, case managers, social service workers, aides, and support staff.

From the Bureau of Labor Statistics… note the graph includes both social workers (about 200k openings) and healthcare about 1.7 million.)

At the end October,

  • more than half of the healthcare job openings were for RNs
  • 15% were for LPNs
  • 7^ for nursing assistants
  • 17% for therapists.

Many of the healthcare workers that have been able to hang in there are exhausted, scared, emotionally scarred and beyond frustration.

Statistics don’t mean anything? OK, here’s what this feels like…

What does this mean for you?

You don’t know what you’ve got till it’s gone. 

Reminder to Trolls and Cowards

I highly value disagreement but only if it is courteous, fact-based and the other side isn’t hiding behind anonymity.

A reminder to all commenters; with rare exceptions – as in when I know who you are – anonymous comments are banned. You know who I am, it is only fair that I, and your fellow readers, know who you are. Indeed there are sometimes good reasons for anonymous comments, but never when you attack, insult, denigrate, and rant. So, Cowards are not welcome here.

Similarly, I’m done debating Trolls who engage in fact-free rants and/or cite completely not-credible “sources” (no, InfoWars is NOT a credible source). If you want to debate, avoid these common pitfalls.