Keefe, Campbell & Associates, LLC

Editor’s comment: Glen Boyle, Medical Fee Schedule project manager, held seven seminars around the state and one statewide webinar to explain the Illinois Medical Fee Schedule to payers and providers of workers’ compensation medical treatment. The Commission announced their appreciation to the industry for all the questions raised and the exchanges between payers and providers that occurred during the seminars and webinar.

The discussions prompted the Commission to issue guidelines on the three issues that came up the most. They also made a correction to their Instructions and Guidelines.

To read the new guidelines, and the questions and answers from the seminars, go to

http://www.iwcc.il.gov/fsq.pdf

We admit we aren’t Medical Fee Schedule specialists. Comments from one of our readers who is a specialist:

I especially liked the part that said to pay CRNAs at physician rates and to, how did they put it? “translate?” whether –AS represents a modifier -80 or a modifier -81.

I also liked their recommendation to just pay 100% to the physician anesthesiologist and let him/her and the facility hash out who pays the CRNA is going to be interesting in practice…

Since they have instructed us to pay ASTC’s at 76% of billed (except carve outs at 65%) if even one of the procedures falls into the POC76 category, it would have been particularly nice for them to have mentioned paying the subsequent/secondary procedures at 50% of 76% which would be reasonable in view of all other multiple procedure rules.

And after all this time they are still just “recommend[ing] reexamining the implant rule. Policy change is difficult and can take some time,” they said.

Other than these points, everything else makes sense in view of existing law, and it is obvious they really tried to be reasonable and direct in clarifying facility reimbursement problem areas. I do applaud their efforts. Communication has at least been established, and that is a very good thing.

We thank MP for her input and permission to publish her thoughts for your consideration.

Editor’s comment: While most medical providers in this state are upset over the reduction of their fees for patient care, like the theory of “one bad apple spoiling the bunch”, many suffer due to the sins of others. However, between cases of excessive treatment and attempts to circumvent or manipulate the Fee Schedule, we believe providers will continue to see bills reduced until they begin to police themselves.

In Martis v. Grinnell Mutual Reinsurance Company, No. 3-08-0004 Illinois Appellate Court Third District (March 27, 2009), Plaintiff—a chiropractor—filed a class action complaint against Defendant, Grinnell Mutual Reinsurance Company, alleging conspiracy, unjust enrichment, violation of the Illinois Consumer Fraud Act and breach of contract. The trial court dismissed all but Defendant’s breach of contract claim. The trial court then granted Plaintiff’s motion to certify a class. On appeal, Defendant argued

(1) Plaintiff does not have a valid breach of contract claim, and

(2) The trial court abused its discretion by certifying a class.

The Appellate Court Third District held Plaintiff cannot state a claim for breach of contract against defendant and thus, reversed and remanded.

Plaintiff chiropractor began treating an employee of Water Management Corp. of Illinois who was injured while working. Water Management had a workers’ compensation insurance policy from Defendant Grinnell Mutual Reinsurance Company. That policy listed Water Management Corp. of Illinois, employer, as the insured. The policy stated: “We [Grinnell] will pay promptly when due the benefits required by you [employer] by the workers compensation law.” Another provision of the policy stated: “We [Grinnell] are directly and primarily liable to any person entitled to benefits payable by this insurance. Those persons may enforce our duties; so may an agency authorized by law. Enforcement may be against us or against you [employer] and us.”

After Plaintiff provided medical treatment to the Water Management employee, Plaintiff submitted bills to Defendant for payment. Plaintiff’s bills were reviewed by a third-party medical invoice review firm, which applied PPO discounts to Plaintiff’s bills even though Plaintiff did not have a PPO agreement with Defendant. Defendant paid Plaintiff the discounted amounts.

In response, Plaintiff filed a seven-count complaint against Defendant, seeking to represent a class of Illinois health care providers who submitted bills to Defendant under workers’ compensation insurance and had bills reduced because of a PPO discount even though the providers did not have a PPO contract with Defendant. Defendant filed a motion to dismiss Plaintiff’s complaint.

The trial court granted the motion in part and denied it in part. The court then ruled on Plaintiff’s motion to certify a class action. The trial court concluded Plaintiff, as a class representative, could not prevail on his consumer fraud count, but could potentially prevail on his breach of contract claim, as a third-party beneficiary of the workers’ compensation policy. As to count IV, the court certified the following class: “All licensed Illinois healthcare providers who: (a) submitted claims for medical expenses pursuant to a Grinnell workers’ compensation policy; (b) received or were tendered payment between October 20, 1996 and October 20, 2006 in which Grinnell took a PPO discount; and (c) did not have a PPO contract with Grinnell.” Defendant filed a petition for leave to appeal pursuant to Supreme Court Rule 306(a)(8) (210 Ill. 2d R. 306(a)(8) (2006)), which was granted.

The Court noted the need to first show an actual cause of action before any class could be certified. The Court further noted Plaintiff was not a party to the contract which would be a prerequisite for maintaining a breach of contract claim. Here, the provision relied upon by Plaintiff, which makes Defendant liable to “any person entitled to benefits payable by this insurance” did not identify any third parties and Plaintiff was not a “person entitled to benefits” pursuant to the Illinois Workers’ Compensation Act. See 820 ILCS 305/4(g) (West 2004) (only “the employee, his or her personal representative or beneficiary” are entitled to benefits under a workers’ compensation policy and have standing to sue an insurer to enforce such a policy). Plaintiff failed to identify any provision in the policy which referenced him or “medical providers,” the class to which he belongs. He did not sustain his burden of proving he was a third party beneficiary of the workers’ compensation policy and because he was not a third party beneficiary of the workers’ compensation policy, he had no right to enforce it. Thus, Plaintiff’s breach of contract action was dismissed. Since Plaintiff’s breach of contract claim is the only cause of action upon which his class action was allowed, Plaintiff’s class action against Defendant was also dismissed.

Plaintiff asked for the other dismissed counts to be reconsidered, but the Court noted he had not filed a cross-appeal and therefore was not allowed to challenge those decisions. The Court nevertheless noted they would also have found the other counts were properly dismissed due to the failure to state a cause of action because he could not meet the standard of unjust enrichment or show Defendant owed him any duty.

This case is also an example of the increasing trend of medical providers moving into the courts in what appear to be attempts to circumvent the workers’ compensation system by either refusing to abide by the Medical Fee Schedule, refusing to bill within reasonable guidelines or in many cases, refusing to participate in the IWCC process to attempt to justify their charges.

Your author spoke to two different Petitioner attorneys who noted they didn’t mind the providers suing the insurance companies because it was a welcome change from their point of view of the refusal of some medical providers to attend a hearing to justify their charges and instead attempting to pursue injured workers for unpaid balances in clear violation of the Illinois Workers’ Compensation Act. One attorney suggested a similar provider had already indicated he would spend more in legal fees in other venues trying to find an alternative method to collect his balances rather than appear before an Arbitrator who would discount the charges on almost every occasion. This article was researched and written by Shawn R. Biery, J.D. If you have thoughts and comments or need the case citation, please send a reply to sbiery@keefe-law.com.

Editor’s comment: After last week’s KC&A Update article about what appears to be intentional overbilling for implants, we got the following responses from you and provide our thoughts:

1.  Who was the surgeon? I ask because Dr. X did an IME on a claim I recently received. He is recommending a “hybrid procedure” which is a 1 level disc replacement and a 1 level fusion directly below. According to his office he charged a patient for a similar procedure in December $137,000 for the surgeon fees. The assistant fee would be 20% of the surgeon fee. Between the doctor and his assistant we would be looking at $164,400! That does not include the hospital or anesthesia or anything else. Of course now my injured worker would like to treat will Dr. X. The only good thing in all this is that I can tell him no.

From our perspective, surgeon’s bills are coded and covered by the Illinois Medical Fee Schedule and they can’t charge whatever they want. The assistant’s participation and fee should be a subject of UR.

2. One strong overall suggestion was for major self-insured employers to try to find a way to pay/process WC medical bills under group coverages and then have WC reimburse your group people. We will bet major self-insured employers are effectively self-insured for both workers’ comp and group health care payments. No group carrier would ever pay what you are being asked to pay for WC care in this goofy state—they would straighten the hospital out and pay a much lower cost. Trust me, it isn’t happening by mistake that hospitals and doctors are billing so much money when they know it is a WC claim—they are opening playing to the system that treats employers in this state so poorly.

From our perspective, we are looking for any major self-insured employer to provide input on this concept. Is it “legal” to do so? Wouldn’t the savings be enormous? What if they gave a Medical Fee Schedule and no one showed up?

3. Three of the major “benefits” that were to accrue to the employer community as a result of the adoption of the medical fee schedule were that:

(1) It would set a baseline (capped) price;

(2) It would limit the growth in expense to CPI-U; and

(3) Price increases would be limited to one per year.

It greatly surprised (and dismayed) the employer community when the Commission announced via the rulemaking process that certain “carved-out” revenue codes* would be paid at 65% of billed charges. Clearly, a percentage based payment with no controls does not comport with the statutory intent—providers may raise prices as often and as much as they wish to meet their then current revenue goal. Under these circumstances, nothing prevents a provider from targeting a revenue goal that makes up for any perceived slights in the rest of the fee schedule.

The hospital fee schedules were created using Illinois Department of Public Health data. At the time the schedules were created, the Commission said that it removed charges related to the carved-out revenue codes from the data to insure that there was not a duplication of expense.  Thus, we know that the Commission has the capacity, using IDPH data, to determine whether there have been wholesale and/or egregious increases in the carved-out revenue codes. Further, the IDPH data is at a level where the individual hospitals can be identified (not by the public, but by the Commission).

What prevents the Commission from examining this issue as part of the report to the Governor and General Assembly that is due by January 1, 2010?

Are hospitals taking advantage of this provision in the rules? What have price increases in these revenue codes been since the implementation of the schedule? Is this a flaw in the implementation of the statute that needs to be corrected?

This comment came to us from one of Illinois’ most knowledgeable experts on the Medical Fee Schedule. To answer her questions:

A. What prevents the Commission from examining this issue as part of the report to the Governor and General Assembly that is due by January 1, 2010? We still feel the IWCC is not run by people who care about the Medical Fee Schedule and saving money for Illinois business—it is run by the other side of the bar who are trying to make as much money as possible in a tough economy. In our view, they aren’t going to care about this issue or want to report it to the Governor and legislature. We will have to see.

B. Are hospitals taking advantage of this provision in the rules? Some hospitals clearly appear to be doing so—you can’t hide the fact the many bills we received were charging amounts like $166,000 for “implants” when the rest of the bill was a third of the cost. Even paying at 65%, this markup is wildly high.

C. What have price increases in these revenue codes been since the implementation of the schedule? To our knowledge, “implant” makers kept their products out of the codes.

D. Is this a flaw in the implementation of the statute that needs to be corrected? Yes, it is one of a number of flaws that no one appears to be addressing in any way. We are writing this article hoping someone takes notice and does something to close the gaps. Illinois also needs a prescription medical fee schedule.

Editor’s comment: On February 1, 2006, the 2005 Amendments to the Illinois Workers’ Compensation Act went into full effect. The secret people who run everything at the IWCC trumpeted the agreed-upon but still secret deal as a blockbuster for both sides. Illinois labor got a laundry list of benefits including heightened rates for low wage earners, higher PPD weekly values for everything but BAW, a jump in the maximum rate for wage loss claimants, higher minimum rates for amputation claims, a new and effectively unlimited rate for temporary partial disability and lots more.

Veteran business observers, including the partners of this firm, were concerned some of these legislative changes were purely illusory. For example, one provision extended the period an 8(d-1) award could be challenged and modified to sixty months. However, under the Cassens Transport ruling, we knew the labor side that controlled the Commission and reviewing courts had effectively stripped out any chance to modify such an award so it didn’t matter if they extended the period to infinity and beyond—it was a “right” that couldn’t be redeemed. We still think the management reps got bamboozled on that one.

In “exchange” for the many new and increased benefits for labor, Illinois management was touted as having received:

1. A shiny new medical fee schedule that would cut medical costs;
2. Utilization review, a new tool to limit duration of medical care;
3. A shiny new WC fraud provision to allow businesses to avoid having to pay phony claims and allow Illinois employers to counterattack when phony claims were made.

Well, in our view, it was all a sham, designed to make us feel like we got something when clearly we didn’t. Three years later, we are suggesting Illinois business considers simply repealing the whole thing when and if we ever get any sort of say in this process again.

Why do we make this bold claim? Well, we have been advised the medical fee schedule is not even close to providing the savings most carriers and TPAs get from “usual and customary” pricing. One veteran observer noted in most areas of our state, doctors and hospitals actually raised their prices to the level of the medical fee schedule—the “floor actually became the ceiling” as this observer pointed out. We had a veteran claimant attorney tell us that was wrong so we ask all of you the question, is the medical fee schedule good for Illinois business? Does it actually limit medical bills? Is it worth the time and effort? Can it be made better?

As to utilization review or UR, last week we received an unbelievably painful ruling where a former Petitioner-attorney who is now an Arbitrator wrote a chilling attack on the whole concept of UR. He literally attacked the scope and concept in any and every way possible. We are told most Arbitrators and Commissioners feel the same way. The injured worker suffered a soft-tissue strain and nine months later, wanted to continue treatment. UR said no. An IME with a neurosurgeon said no. Surveillance indicated claimant was healthy and outwardly normal. All diagnostic testing was negative. In light of all of that evidence, the Arbitrator said yes you need even more care, solely for your subjective complaints. A unanimous Commission affirmed—we assure all of you that highlights the fact that even the management commissioner is onboard with dropping UR as a tool in this state; he is following the trend.

We feel this case epitomizes the enormous flaw in the 2005 Amendments to the WC Act—the UR provision was voluntary and not mandatory. Trust us, the secret and hidden folks who run the Commission have totally backed off their bargain and are routinely ignoring UR like they ignore everything else that might actually rein in such shenanigans. The failure to follow UR as a tool to rein in medical care is a bitter pill for Illinois business to swallow. What we don’t understand is why a claimant who fractures one ankle in a non-work-related event is allowed by his group health care provider to treat for six weeks and then no more care based on UR. In contrast, if the same guy/gal fractures the other ankle at work, they can treat and remain off work for months and years in a virtual medical fantasy-land with no defined limits on doctors or other care-givers. As we have told our readers for years, we feel Illinois business should only have to “pay what Blue Cross pays” whether it is a workers’ comp or non-work-related event.

Finally, the WC fraud provision was also wholly illusory. The statutory changes created an investigative unit at the IDFPR to investigate both WC fraud by workers and uninsured employer compliance. They actually do investigate WC fraud by workers in an interesting and herky-jerky fashion. The problem which follows the investigation is that it falls into a black hole of prosecutorial indifference—there are about 2 of Illinois’ 102 counties that actually prosecute WC fraud. The State Appellate Defender’s Office that educates state’s attorneys across the state won’t teach WC fraud. In counties where they won’t prosecute WC fraud, they basically treat the charge and IDFPR investigation as a piece of moldy cheese—they won’t respond to anyone in any meaningful fashion. Our vote on WC fraud by workers in this state is to either get the state’s attorneys to prosecute or stop wasting taxpayer dollars investigating it in counties where they won’t. And cut the budget and lay the fraud-busters off.

Our message to all of our readers and to everyone on both sides of the Illinois workers’ comp system is to start to understand the U.S. economy is getting tougher every day. Businesses across the U.S. are attacking labor costs to insure their survival in the global marketplace. Trust us; there are managers and CPA number-crunchers going over every cost of operations in our state as it relates to other states and how it relates to world costs. Some of the thousands of layoffs in our state represent jobs lost that will never come back.

We need to position Illinois to be fair and reasonable in protecting injured Illinois workers. From the outside looking in, our system appears to create accidental injuries for which no state or country allows recovery. The Illinois WC system rewards laziness and malingering and physicians who over-treat. Even real injuries some times get benefits that are at both eye-popping and premium-busting levels. What worries us most is management will get back into control of the legislature, governor’s mansion and eventually the courts and the level of reform is going to “kill” this current system that seems almost totally out of control. We would hope the secret folks who run the Commission see that coming and try to make it fairer and more reasonable using tools you agreed to use any way. We appreciate your thoughts and comments.

Editor’s comment: If you have been watching the news, you may note Ingenix ran into a little trouble with the fraud-busters in the New York Attorney General’s office in the last year. About ten days ago, New York Attorney General Andrew Cuomo announced a “victory” in his battle with the insurance industry over how out-of-network physician claims are paid. Cuomo argued the industry’s use of its out-of-network “customary and reasonable” database “defrauded” consumers and he sued the database’s manager, United Health’s Ingenix, over the controversy. It appears they have reached a resolution that may affect all Ingenix customers across the U.S.—if you rely on the IWCC Medical Fee Schedule to pay bills, this will probably affect you in the long-term.

Here’s how the settlement will work:

• Ingenix will pony up $50 million to set up an independent not-for-profit organization to define and operate a “customary and reasonable” database.

• The health care and insurance industry gets to continue determining what customary and reasonable physician charges are through this not-for-profit setting.

• Exactly how they do it will continue to be done by computer geeks in the way systems gurus do things–pretty much in their own minds using slide-rules, nano-bytes and data-crunching.

While an undetermined university will operate the system, the industry that will finance it will presumably have a great deal of input into it. The industry’s use of the database may be more defensible and therefore less “fraud-like” to the public since one of its own is no longer arguably directly controlling the entity.

Most observers note $50 million is pennies compared to the out-of-network customary and reasonable cost-cutting any one of the big health plans achieves every year. This settlement is designed to render the ability of state medical societies and class-action trial lawyers to attack the system much harder. What may also be better is consumers, presuming they know about the new “transparency” website, will be able to go on-line to see what their allowable charges for a specific service may be in advance of consenting to treatment by a physician. So, if John Q. Public is on vacation in Sarasota and needs to go out-of-network to the emergency room, prior to rushing off for treatment they can go find a computer, find the website and potentially shop around for emergency rooms that have the lowest out-of-network payments. Please note this will require lots of computer acumen and the need to care about such things in what may be an emergency setting.

From the perspective of out-of-network physicians, they will still be the subject of the mysterious abuse caused by “reasonable and customary” cost-cutting of their fees. The result is going to be about the same and their state medical societies may now have less reason to challenge the customary and reasonable system than before.

How this will affect the Illinois Workers’ Compensation Medical Fee Schedule is hard to fathom. At the first glance, it is our understanding most carriers bypass the higher cost Medical Fee Schedule and go right to the lower “reasonable and customary” charges. Obviously, this practice renders the Medical Fee Schedule worthless and, at best, a fall-back position for litigation only. If the “reasonable and customary” system is accepted by Illinois physicians in the workers’ compensation system, it results in more certainty and faster payments for the docs and concomitant savings for Illinois business.

There is also the possibility Ingenix numbers, upon which the Medical Fee Schedule may be based will be more accurate and independently verifiable. We see that as a plus. We would appreciate your thoughts and comments.