Study: Spinal Implant Loophole Costs Calif. Workers’ Comp $67M

Workers’ compensation medical costs in California were boosted by nearly $67.5 million in 2010 due to loophole in the law that allows double billing for surgical implants, according to a study released on Wednesday by the California Workers’ Compensation Institute.

That number could be “significantly higher” when CWCI compiles a report following the anticipated release of more current government data in the next few months, one of the report’s authors said.

“We think that’s an extremely conservative estimate,” said Alex Swedlow, executive vice president of research for CWCI. “I would not be surprised if that dollar value goes up significantly higher.”

Swedlow,who called the report a “preliminary analysis,” believes their estimate is low due to the lack of data available data. The full set of data for 2011 from the California Office of Statewide Health Planning and Development isn’t expected to be released for at least another month. Swedlow said the authors used a previous study from CWCI based on information from 2008 and updated it with more current information to produce Wednesday’s study.

The study was conducted at the request of the Senate Committee on Labor and Industrial Relations, which is chaired by state Sen. Ted Lieu, D-Torrance.

Lieu is the author of Senate Bill 959, which 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.

Lieu’s bill cleared the Senate floor on a 34-2 vote late last month and is now in the Assembly.

According to the CWCI study, duplicate payments on all pass-through procedures averaged $20,137.

CWCI researchers reviewed discharge data from the Office of Statewide Health Planning and Development and identified 4,718 workers’ compensation back surgeries during 2010 in which spinal hardware could have been used.

The researchers applied a 71 percent surgical implant rate calculated in an earlier study and estimated that 3,350 of the 2010 back surgeries involved hardware that made them eligible for the duplicate payments, according to the authors of the study.

Authors arrived at the $67.5 million figure by multiplying the $20,137 average with the estimated 3,350 workers’ comp back surgeries that used implantable hardware.

That figure was up 22 percent from $55.5 million in 2008, according to CWCI.

Lieu, who had been using estimates of $40 million and up to push his bill, said he didn’t expect it to be this high.

“I was really surprised to see it near $70 million,” Lieu said.

Lieu noted that the double-billing being incurred is on top of the 120 percent of cost already being charged in such workers’ comp surgeries.

“Workers comp already charges a premium for spinal surgery,” he said. “It’s completely unnecessary.”

The Association of California Insurance Companies has stated its believe that some hospitals have been pushing such surgeries for the money they can make due to the loophole.

Lieu said he believes the study gives his bill further credence, and he believes it will stop bad actors from taking advantage of the system.

“I think it shows that when you have a loophole then bad actors will exploit it,” he said.

Swedlow said the 22 percent increase from 2008 doesn’t reflect a shift in the number of workers’ comp spinal surgeries, but and increase in the mean value that’s being charged for the surgeries.

“There are fewer back surgeries in California workers’ compensation,” he said. “There are fewer inpatient admissions, so there are fewer back surgeries. However the cost of instrumentation continues to rise.”

Topics California Workers' Compensation