Idaho: Opening Skirmish in the Cost-containment Wars

Friday, June 4, 2010 | 0

With a population around 1.5 million and a land mass the size of New England, Idaho is probably not the first state that comes to mind in the national struggle to contain medical costs. Nonetheless, orthopedists in Idaho have managed to attract the attention of the federal government in their effort to increase rates of reimbursement for services. The feds are not happy with the Idaho docs.

The first problem came with the workers comp fee schedule. The "Resource-Based Relative Value system" set a price of $88 for most orthopedic procedures. The 65 or so orthopedists in Boise got together and decided to refuse to treat workers comp cases. As a result, the Industrial Commission raised the rates by 61%. Score one for the docs.

Emboldened by their success, the docs refused to accept Blue Cross patients under the prevailing fee scheme. But in taking on the conventional health care (as opposed to the state-based workers' comp system), the docs crossed a line from a program run exclusively by the states into a behemoth system in which the federal government plays a big role. The feds came down hard with charges of violations of the Sherman Anti-Trust Act. Prosecutors sued five doctors, the Idaho Orthopaedic Society and the Idaho Sports Medicine Institute in Federal Court. If you think about it, it's not hard to see how a bunch of doctors agreeing to hold out for higher reimbursements might fall under the general heading of "price fixing."

As we have blogged rather frequently, Massachusetts has the lowest fee schedule in the nation. Most orthopedists have responded by refusing to accept the (ridiculously low) rates. But unlike the orthos in Idaho, the Massachusetts docs deal with the paltry rates on their own. By refusing to accept them, they compel insurers to negotiate higher rates. These negotiated rates vary from doctor to doctor. There is simply no way and no need for the hundreds of orthopedic doctors in Massachussetts to agree on rates: it would be like the proverbial herding of cats.

In Idaho it's different. The state's unique characteristics the large land mass and relatively small population make a genuine "conspiracy" possible. The docs all know one another. So what seemed to them a fairly innocent attempt to leverage the system for higher reimbursement rates appeared to the feds as a conspiracy. In other words, their mistake was in sharing information about the rates and in uniting to take action against them. Had they acted individually, there would have been no violation of the anti-trust act.

<b>War on Docs?</b>

One blogger with roots in the libertarian Ludvig Von Mises movement sees in the government action a declaration of war against doctors. He believes that doctors will be "forced" to accept the government rates. Not exactly. As we have seen in Massachusetts, individual doctors can accept or reject patients as they please. What they cannot do is collude with fellow doctors to achieve a fee schedule to their liking.

With rising medical costs looming over every aspect of our economy, this little skirmish in Idaho is simply the opening salvo in what is likely to be a prolonged and painful battle to contain the costs of health care. It's no accident that the Obama health care bill punted on the cost-containment issue. One person's cost containment plan is inevitably another's cut in pay.

In the coming months, the battle of Idaho will move into the great metropolitan areas of our country. Just imagine the formidable barricades to be erected by the men and women in blue scrubs! This will be an interesting brouha, to say the least.

<i>Jon Coppelman is a principal with Lynch Ryan & Associates, a Massachusetts-based employer consulting firm. This column was reprinted with his permission from the firm's blog, http://www.workerscompinsider.com</i>