January 26, 2006/revised April 28, 2006

Workers’ Compensation Medical Fee Schedule Under Applicable Rulemaking

On July 20, 2005, Governor Rod R. Blagojevich signed HB 2137 (Public Act 94-0277), amending the Workers' Compensation Act and Workers' Occupational Diseases Act. While some of the provisions have gone into effect, medical fee schedule provisions became effective on February 1, 2006. This memorandum reviews the medical fee schedule development and status, the billing provisions, and utilization review requirements under the new law.

IHA was deeply involved in Workers’ Compensation reform negotiations last year. The law is the first major overhaul of the Workers’ Compensation Act in over 20 years with support from business, labor and the Governor’s Office. Passage of reform was likely because of the makeup of the legislature, the precedent of 46 states with legislated workers’ compensation fee schedules, and the prohibition against balance billing in all but 4 states throughout the country. Accordingly, IHA participated in negotiations to make the law more palatable to our members.

Since the law was signed, IHA has been working with the Illinois Workers’ Compensation Commission (IWCC) in helping to model the fee schedules. The Governor recently appointed Workers’ Compensation Advisory Commission which advises the IWCC and meetings were recently convened. The fee schedule and its applicable guidelines were adopted by IWCC on January 26.

Rulemaking
The IWCC issued emergency rules on the fee schedule which are in effect until final rules are adopted.

The rules and fee schedules may be accessed on the IWCC web site: http://www.iwcc.il.gov. Users are able to search the fee schedules by individual code, or by type of service or by geozip (first 3 digits of provider’s location).  Users may also download the entire fee schedule.  The schedule contains roughly 15,000 codes for each of the 29 three-digit zip codes in Illinois and will apply to those medical treatments and procedures that are covered under the Act and are rendered on or after February 1, 2006. The law made no changes to medical fees for treatment rendered before 2/1/06. 

I. WORKERS’ COMP PROVISIONS ON PROVIDER REIMBURSEMENT AND MEDICAL FEE SCHEDULE(S)
Section 8.2, Fee Schedule, of the Act sets out the rules to establish fee schedules for workers’ compensation claims effective February 1, 2006, whereby:

As such hospital charges are not affected. However, hospital payment is affected as outlined above. In addition, billing and collection is affected.

The law outlines that the IWCC establish fee schedules for:

whereby the fee schedules are based on 90% of the 80^th percentile of provider charges between August 1, 2002, and August 1, 2004, updated by the CPI-U. The charges are designated by geozip. If there were not enough charges to calculate a valid percentile for a specific procedure, the IWCC is to group up to 4 geo-zips if there are at least some similarities in data as well as area demographics/economics. In any case where there are less than 9 charges, reimbursement under the law is to "occur at 76% of current charges and fees as determined by the Commission." The fee schedules are not static – they will be adjusted not later than September 30 each year by CPI-U. In addition to the fee schedules prescribed by law, the IWCC is also designating specific fee schedules for anesthesia and dental services.

Outlined below is a description of the fee schedules applicable to hospitals and the rules that apply:

a. Hospital Inpatient – run via DRGs (diagnosis related groups) by geozip using historical charge (minus charge data from eight revenue codes generally consisting of implants/devices discussed further below) from Illinois Department of Public Health (IDPH) data. Where there were not enough charges, geozips were combined where data was similar. The "standard" DRG fee schedule applies to the vast majority of inpatient hospital bills and is confined to a hospital setting for twenty-four (24) hours or more. Hospitals must clearly identify DRG assignment on the claim form. Certain rules apply:

Old/New DRGs: The fee schedule references historical observations based on the period it was aggregated. As such, specified DRGs are classified as "NO LONGER VALID". In addition, new DRGs (i.e., 541-559) are listed as "NEW CODES" in the fee schedule. New DRGs will be paid at 76% of billed charges (POC76) but are subject to some revenue code "pass-through" considerations discussed below.

Pass-Throughs: DRG fee schedule amount reflects the maximum medical reimbursement amount for an entire inpatient hospital stay; however, billed amounts associated with eight (8) revenue codes will not be covered under the DRG fee schedule amount. It is important to note that when the fee schedules were calculated, they did not include the amounts for these 8 revenue codes.

Thus, implants, prosthetics, orthotics, devices, and other items will not be reimbursed under the DRG fee schedule amount to keep current with technology. These charges are classified as "pass-through charges" and will be paid at a rate of 65% of the charged amount as consistent with the provider’s standard charge master rate. The following revenue codes qualify as pass-through charges on ALL inpatient claim forms/ALL DRG assignments:

• 0274 (prosthetics/orthotics)
• 0275 (pace maker)
• 0276 (lens implants)
• 0278 (implants)
• 0540&545 (ambulance)
• 0624 (investigational devices)
• 0636 (drugs requiring detailed coding)

Outliers: High cost/high utilization services are subject to extra payment. Specifically, "when a bill for an inpatient stay is equal to or above two times the fee schedule amount for the assigned DRG, then the maximum reimbursement amount will be the fee schedule reimbursement amount PLUS 76% of all charges that exceed the fee schedule amount." The calculation to determine whether or not the charged amount exceeds twice-fold the DRG fee schedule is to be made AFTER pass-through revenue code charges have been subtracted. In the event that the fee schedule amount defaults the 76% of current charge ("POC76"), the revenue code rule discussed above will apply and will be paid at 65% of the charged amount. As such, the billing department must remove those codes and charge for them separately from the DRG.

b. Trauma – run via DRGs by geozip using historical charge (minus charge data from eight revenue codes generally consisting of implants/devices discussed under inpatient) from IDPH data. Where there were not enough charges, geozips were combined where data was similar. All inpatient hospital bills from state-designated Level I and Level II trauma centers AND WHICH contain an admission type of "5" (UB-92 FL19) are subject to the Trauma Inpatient Fee Schedule (and NOT the "standard" fee schedule). While, POC76 applies to the vast majority of trauma bills, there are amounts established for certain procedures in certain geographic areas where there was an ample amount of cases. As such, please review this fee schedule to substantiate appropriate reimbursement. All trauma admissions are subject to the same rules with respect to old/new DRGs, revenue code rule/pass-throughs, outliers. Hospitals must specify DRG on the claim form.

d. Hospital Outpatient – fee schedule amount is POC76 for all hospital outpatient services. Revenue code rule/pass-throughs discussed under inpatient apply.

e. Freestanding Ambulatory Surgical Centers – fee schedule amount is POC76. Revenue code rule/pass-throughs discussed under inpatient apply.

f. Professional Services – run via CPT (current procedural terminology) by geozip using historical charges from Ingenix database. All allied healthcare providers and independent diagnostic testing facilities subject to this particular fee schedule. Reference IWCC website for further information.

II. WORKERS’ COMP PROVISIONS ON BILLING
Section 8.2, Fee Schedule, of the Act sets out the rules for provider billing practicing for care covered under workers’ comp. The following scenarios are covered:

a. Undisputed Claims for Work-related Illness or Injury:

1. Responsible Employer Identified [Section 8.2(d)].

a. Employer must pay "clean" claims within 60 days of receipt at the:

i. negotiated contract rate (if any); or

ii. the lesser of charges and fee schedule amount [Section 8(a)]

b. Late payment is subject to 1% per month interest.
c. Provider may not bill employee for difference between its charges and employer payments—Balance Billing Prohibited.

2. Employee Belongs to a Group Health Plan [Section 8.2(e)].

a. Provider may bill GHP for actual charges (preserves provider’s ability to seek GHP payment if claim is deemed non-work related.)
b. GHP must pay covered "clean" claims within 30 days of receipt of bill.
c. Provider may only bill employee for applicable GHP deductibles, co-payments and co-insurance.

3. Employee does NOT Belong to a GHP and No Employer Identified

a. Provider may bill employee for reasonable charges.

b. Disputed Claims:

1. Employer Disputes Claim as Compensable [Section 8.2(e-5)]:

a. Provider may bill employee for actual charges
b. Provider must stop collection efforts upon receipt of Notice of Commission Filing from employee
c. Statute of Limitation is Tolled.

2. Partial Employer Payment [Section 8.2(e-10)]:

a. Pre-Notice of Commission Filing

i. Provider may "balance" bill employee for lesser of:

1. fee schedule amount;
2. contract rate; or
3. actual charge

b. Post-Notice of Commission Filing

i. Provider must stop collection efforts upon receipt of Notice of Commission Filing
ii. Statute of Limitation is Tolled.

3. Provider Conduct During Pending Dispute [Section 8.2(e-15)]

a. Provider may send "reminders" to employee about potential payment obligation.

i. Must state reminder is "NOT A BILL."
ii. Must state employee need not pay any amount until:

1. Claim is resolved; or
2. Employee fails to supply case status information within 90 days of a request for such information.

b. Reminder may ask employee to supply case "status" information.
c. Employee’s failure to supply such information with 90 days of the request permits provider to resume collection efforts.

4. Provider Conduct Upon Dispute Resolution [Section 8.2(e-20)]

a. Provider may resume collection efforts from employee (or the employee’s GHP, if any).
b. Compensable Services: For services deemed "compensable," employee is responsible for any outstanding bills at the lesser of actual charge or fee schedule amount plus interest at 1% per month from receipt of bill until payment is made.
c. Non-compensable Services: For services not deemed "compensable," the provider may bill the employee and the employee is responsible for the provider’s actual charges.

III. WORKERS’ COMP PROVISIONS ON UTILIZATION REVIEW
Section 8.7, Utilization Review Programs, of the Act sets out the rules for utilization review under workers’ compensation. The law requires that all workers’ comp utilization review programs register with the State and comply with Workers’ Compensation Utilization Management standards or Health Utilization Management Standards of Utilization Review Accreditation Commission (URAC) sufficient to achieve URAC accreditation OR submit evidence of URAC accreditation. The URAC guidelines are very specific with respect to protection of information and the appeals processes, amongst many other requirements.

In addition, under the law only health care professionals are able to make determinations of medical necessity of health care services during the course of utilization review. Language was included that "nothing diminishes the rights of employees to reasonable and necessary medical treatment or choice of health care provider or rights of medical examinations." Employers and utilization review firms who deny payment, or refuse to authorize payment, must comply with the requirements of this section. Most importantly, under the law utilization review will be considered by the IWCC along with all other evidence in looking at reasonableness and necessity of medical bills or treatment.

Conclusion
IHA will inform you once adopted rules are posted. In the interim, please contact Elena Butkus with questions on the hospital fee schedules for your area at (630) 276-5526 or ebutkus@ihastaff.org. Professional service fee schedule concerns should be directed towards the provider’s professional association.