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A bill aimed at ending double payments for spinal surgery devices passed state Senate resoundingly on Wednesday and is now on its way to Assembly.
Senate Bill 959 will save taxpayers tens of millions of dollars per year, according to its author, Sen. Ted Lieu, D-Torrance.
“By lowering the pass-through we will save between $40 and $60 million annually,” Lieu said.
The bill would reduce costs, prevent the over utilization of spinal surgery devices and put an end to needless and duplicative payments in the workers’ compensation system, its proponents say. Few have openly opposed the bill. It cleared the Senate floor on a 34-2 vote.
The bill would address the Medicare fee schedule adopted in 2004 and California law which allows for a 120 percent payment for medical costs and allows separate costs for material and hardware in spinal plants to be added upon the original costs.
This payment, known as a “pass-through,” is considered a double-payment because it allows a hospital to pass along the cost of a device, instrumentation, or hardware to even though the cost is technically taken into consideration when setting the reimbursement level, according to the Association of California Insurance Companies, one of the bill’s major backers.
ACIC President Mark Sektnan sees the bill as a potential victory and good step toward addressing one of the myriad cost drivers in California’s workers’ comp.
“I think it’s an important issue in terms of our conversation about addressing cost drivers,” he said.
Sektnan estimates the system has between $1 billion to $1.5 billion of costs it needs to get under control. The estimated savings from the bill may be a drop in the bucket, but it’s a sign of more effort to reign in the workers’ comp system, he added.
“It’s a small number but it’s an important number because it shows that we are serious about taking on cost drivers,” he said.
The bill received support from both labor and the state’s business community, likely because the system as it is now appears to incentivize spinal surgeries to the point where they are becoming a business opportunity for some hospitals to take advantage of.
“A small number of hospitals in Southern California have identified spinal surgery as a business opportunity,” Sektnan said. “This bill is also fundamentally important to the injured worker. What was found is that requirement to pay twice is providing an incentive for some physicians to provide more spinal surgeries than appropriate.”
Supporters of the bill have cited studies by Rand Institute for Civil Justice and Health that have concluded the double-payment is unnecessary and it incentivizes over utilization.
“The current practice leads to double billing, inefficiencies and could lead to abuse,” Lieu said.