Outpatient Hospital Costs

Friday, July 11, 2008 | 0

By McConnaughhay, Duffy, Coonrod, Pope & Weaver

The Three-Member Panel on Workers’ Compensation has postponed any action on an outpatient hospital reimbursement manual while negotiations between the DWC and the industry continue.

Restructuring healthcare provider reimbursements has been an ongoing task since the 2003 reforms. As part of the statutory changes, lawmakers specified that all outpatient physical, occupational, and speech therapy must be reimbursed per the physician fee schedule, along with any radiological and clinical laboratory service not related to a surgical procedure. The outpatient surgeries are reimbursed at a percentage of usual and customary charges.

At issue before the three-member panel is how to define “usual and customary” and create a valid methodology that would lead to a fee schedule that would be applied to all outpatient surgeries.

Usual and customary charges are traditionally defined as the billed charges per the individual hospital’s charge master. Critics point out that the payment scheme allows hospitals to determine their reimbursements unilaterally since they control their charges, which,
in theory, can be changed on a daily basis. The First District Court of Appeal recent ruled in One Beacon v. AHCA (32 FLW D1578), that a legislative change in 1994 prohibited the calculation of a usual and customary charge on a per hospital basis in favor of the average fees of all hospitals in a given area. The ruling, however, leaves open the question of how to define or determine the fees and geographic zones.

At a recent panel meeting, the Research & Planning Consultants —which was retained by the division— issued its report examining the current methodology used to pay hospitals and several scenarios to calculate an industry-wide payment method. RPC recommended that Florida follow the example of six other states and tie outpatient hospital rates to the Medicare system. Specifically, the fees would first come from the Medicare Outpatient Prospective Payment System, which establishes payment
rates for most all outpatient services.

In addition to the OPPS method, Medicare has four other fee schedulesincluding one to cover physical, occupational, and other outpatient rehabilitation services. Then there is a clinical lab fee schedule, a prosthetics and orthotics and supplies fee schedule, and an ambulance fee schedule.

As for Beacon v. AHCA, the consultant recommended that rather than trying to match up the charges of hospitals and
determine geographic areas, the state implement a Medicare-based system.

Like the current state provider fee schedule, the hospital fees would be calculated using Medicare’s schedule with a payment adjustment factor. For example, Tennessee sets outpatient fees at 150% of Medicare. Medicare already divides Florida into geographic zones, which would resolve the questions raised in Beacon. For now, however, the DWC and the industry are continuing to negotiate.

McConnaughhay, Duffy, Coonrod, Pope & Weaver is a defense law firm with offices in nine Florida cities.