Insurers Oppose Change in South Carolina Workers’ Compensation Medical Fees

By Michael Adams | August 24, 2011

A new South Carolina regulation for calculating medical fees in worker injury cases has set off opposition from insurers and business groups that claim it favors certain medical providers over others and will increase costs for employers.

The South Carolina Commission on Workers’ Compensation is promulgating a regulation that would give it flexibility to adopt alternative fee schedules for different medical specialties such as medical implants.

The state currently uses the Medicare-based Resource Based Relative Value System. Developed and overseen by the federal Center for Medicare and Medicaid Services, it assigns a value to medical procedures that are reimbursed using a conversion factor. Based on that factor, a state typically assigns a percentage upward or downward based on its overall medical costs.

For example, in South Carolina, in-patient and out-patient hospital services are reimbursed at Medicare plus 40 percent, although the actually amount providers receive may be less depending on their contracts with insurers or managed care networks.

Commission Executive Director Gary Cannon said the new rule is not an attempt to completely drop the RBRVS methodology. Prior to adoption of the RBRVS, the state paid health care providers on a fee for service basis, which basically allowed providers to set their own rates. When the RBRVS system was opted in 2003, it saved the state $100 million, Cannon said.

“The commission is just looking to have the flexibility to consider other options,” Gannon said. “If some other model would save costs, it just makes sense to be able and use it.”

He said the commission would like to reach a negotiated agreement on the rule that all the parties are willing to accept. However, he said it is also prepared to take its case to the state Legislature.

Medical providers are supporting the idea. They argue that the RBRVS schedule is designed to apply to overall health care services and primary care, which applies to wider population and addresses a broader range of health issues. They say workers’ compensation health care is based more on a sports medicine paradigm and a smaller slice of the general population.

“Given the unique nature of the system and the patient population, we believe the commission needs the flexibility to make targeted changes in the valuation of services to align resources in the system to meet the goal of rapid return to function,” said James O’Leary, M.D., president of the South Carolina Orthopedic Association.

But the American Insurance Association opposes the change, arguing it is politically motivated and would eventually cost businesses more in premiums. “Providing higher reimbursements to politically favored medical specialties will lead to overutilization and increased costs,” said Ken Stoller, AIA senior counsel.

The South Carolina Small Business Chamber of Commerce also is objecting, claiming it would not improve outcomes for injured workers but could potentially raise costs.

“The commission has invested much time in making sure that the present medical services compensation system is fair to all parties including businesses, providers and workers,” said Chamber President Frank Knapp. “Amending the regulation will undermine this delicate balance when workers’ compensation loss costs and premiums are in decline.”

According to Cannon, the issue of rewriting the medical fee rules came to the forefront this year when the commission considered a carve-out that would have used a different fee schedule to reimburse surgical implants.

At the time, the commission was considering different options, such as using the state employees’ fee schedule, but the commission found it couldn’t use the carve-out under current rules even if it saved money. “The attorneys issued a legal opinion saying definitely the way the rule was written, the commission had no choice but to use RBRVS with a single conversion factor,” he said.

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