December 21, 2009

Bath Iron Works: "All I want for Christmas is a Fee Schedule"

It's hard to think of anyone bullying Bath Iron Works, the General Dynamics subsidiary that builds destroyers for the U.S. Navy. But they are being kicked around like the proverbial 90 pound weakling by the workers comp system in Maine. Two years ago we blogged the inability of Mainers to come up with a viable fee schedule for workers comp medical costs. The legislation authorizing the fee schedule became law in 1992. Now we approach 2010 - nearly 20 years! - and there's still no fee schedule.

Workers comp insurers are free to negotiate rates for medical services. In effect, they develop their own de facto fee schedules. Bath Iron Works (BIW) is self-insured for comp. They do not have the leverage to negotiate fees. So when a local hospital sent a bill for $107,000 for treatment of two injured workers, BIW filed a lawsuit. They lost: they had to pay the hospital's "usual and customary" fees - an ironic appelation if there ever was one. The only suckers stuck with paying the full boat (so to speak) are self-insureds and uninsureds.

So how is the fee schedule coming along? And why the inordinate delays?

The rule-making group charged with developing the fee schedule is trying to come up with something acceptable to the medical providers. That's like asking an employee how much of a pay reduction they would like. How about nothing? In the current draft, total billings of $80 million would fall by about $1 million. In other words, a drop of less than 1 percent. That's a fee schedule only a medical provider could love!

The Massachusetts Model
Maine officials are worried that low fees would drive doctors away. Paul Dionne, executive director of the Maine Workers' Compensation Board, says he heard from a group of orthopedic doctors who said if the board made the new base fee too low, "they weren't going to treat injured workers. They're private, they can do that."

That's not what happens in Massachusetts, which has the lowest fee schedule in the nation. Everyone recognizes that the fee is too low. So insurance carriers and TPAs routinely negotiate a reasonable fee with doctors on an individual basis. For example, the scheduled fee for hand surgery is only $725. The "usual and customary" fee of a skilled surgeon might be $5,000. The insurer and doctor would settle somewhere in the middle, perhaps $3,000 for the service. It sounds frictional and inefficient and to some degree it is, but overall, medical costs remain unusually low in Massachusetts, doctors continue to provide services and injured employees are satisfied with the results. The system is working despite what appear to be severely deflated medical rates.

One unusual and perhaps unintended benefit of the low fee schedule is the leverage it provides against medical providers who refuse to treat with a return-to-work focus. If "Dr. Feelgood" insists on keeping a marginally injured employee out of work, the adjuster can dig in and offer to pay only the deflated fee schedule rates. That will get the doctor's attention immediately.

Maine used to be part of Massachusetts. If they want to solve this particular problem, they might consider re-joining the Commonwealth, or at least copying Massachusett's highly successful comp model. Step one involves some tough negotiations - with or without the doctors in the room. Thus far, by trying to please everyone, Maine is punishing some of their most valued employers. Nearly twenty years into a failed process, it's time to face reality: a fee schedule is a cut in pay. If the doctors are happy, it's not an effective fee schedule.

Meanwhile, it looks like a bleak Christmas for the mighty folks at Bath Iron Works. There are undoubtedly a lot of nice goodies under their tree, but a fee schedule is not among them.

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I do read your Blog entries.

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This page contains a single entry by Jon Coppelman published on December 21, 2009 11:22 AM.

(Cannon) Fodder for a Friday: The Fate of Foreign Interpreters in Iraq was the previous entry in this blog.

"No, Edith, There is No Sanity Clause" is the next entry in this blog.

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