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A workmen's compensation compromise: Arkansas Medical Society and state Chamber of Commerce reach an agreement, but labor is locked out.

Arkansas' hottest small business issue -- soaring workmen's compensation insurance rates -- may begin to cool this summer.

More than two months of negotiations between the state's business and medical communities have produced an agreement on the fees business leaders think physicians should receive for treating injured workers.

David Wroten, assistant executive vice president of the Arkansas Medical Society, says the compromise calls for fees that are 17 to 20 percent lower than most current charges. The proposed fees average about 3.5 percent less than Blue Cross & Blue Shield of Arkansas' fee schedule.

It is up to the state Workers' Compensation Commission to decide whether to adopt the Medicare fee schedule, as earlier proposed by the commission, or the negotiated plan put forth by the Arkansas Medical Society and the Arkansas State Chamber of Commerce/Associated Industries of Arkansas Inc.

All agree, however, that there is a need to stabilize medical costs.

State Sen. Nick Wilson of Pocahontas, long a major voice in workmen's compensation affairs, predicts the commission will choose the compromise proposal. But the commission's chairman, James Daniel, is making no commitment.

Daniel says it is the commission's goal to have a fee schedule in place by June 15, although he concedes the deadline may have to be extended. He and the other two commissioners have 3,423 written public comments to sift through in addition to testimony from a public hearing the agency held May 12.

The negotiators, including representatives of the Arkansas Hospital Association, asked the commission to delay adopting a hospital fee schedule for 90 days. They complained of a complicated pricing situation.

The commission's consultant, Walt Patterson of Little Rock, recommended the Medicare fee schedule and opened this month's public hearing by calling it "a good starting point."

"Astronomical Rise"

Patterson, a former director of the state Department of Human Services, warns that an "astronomical rise" in workmen's compensation rates could "severely limit" economic development. From 1988 to 1991, Patterson says, the medical portion of workmen's compensation cases rose from 47.35 percent to 52.3 percent. The per-case average increased from $1,137 in 1988 to $1,582 last year.

Pat Hedrick is claims manager for Liberty Mutual Insurance Co. in Little Rock, the nation's and the state's largest workmen's compensation carrier. He says Arkansas premiums rose 128 percent from 1986 to 1990. That's because the average medical cost per claim in Arkansas is 32 percent higher than the national average, he says.

Hedrick describes the costs as "out of control" and says adopting the Medicare schedule would be "a bold step."

Jim Blakley, director of the Arkansas Industrial Development Commission's established industries division, says surveys show that business owners and managers rank health care and workmen's compensation costs as the most significant issue in this election year. That is especially true of firms with 11 to 49 employees.

But Wroten says Arkansas physicians are "vehemently opposed" to Patterson's Medicare fee schedule recommendation because it would not cover the costs of many procedures.

"We can accept |the compromise~, but most |physicians~ are willing to go to court over anything less," he says.

Organized labor, which claims to represent all workers on injury compensation matters, also opposes the Medicare schedule.

The secretary-treasurer for the AFL-CIO in Arkansas, Jim Clark, says the Medicare schedule will drive physicians away from treating injured employees, thus limiting employees' access to care.

Clark, in fact, says there is no cost crisis in workmen's compensation. He says the "doomsday predictors" go to work whenever the AFL-CIO proposes workmen's compensation reform in the form of an initiated act. The labor organization is doing just that this year.

Kenneth Tonymon, a Jonesboro neurologist, says workmen's compensation cases make up 10 to 15 percent of his practice. That equals 90 to 100 patients per year. The large amount of paperwork associated with workmen's compensation cases makes it seem as if those patients constitute 30 to 40 percent of his practice, Tonymon says.

If fees are too low, the northeast Arkansas specialist predicts that doctors will be tempted to abandon workmen's compensation cases.

Neither labor nor the insurance industry was included in the negotiations that produced the compromise. That was despite the fact that a powerful legislator, Sen. Jerry Bookout of Jonesboro, urged the State Chamber of Commerce and the Arkansas Medical Society to include all interested parties.

Negotiated Agreements

Negotiated agreements have led to the only significant workmen's compensation changes since 1968.

Workmen's compensation became a reality in Arkansas because voters demanded it through an initiated act in the late 1930s.

It takes a two-thirds vote in the state House and Senate to change an initiated act. Such margins have been impossible to obtain without the support of both business and labor.

No legislation is needed for a fee schedule, though. The Legislature gave the commission authority to adopt a schedule in 1986.

Meanwhile, the AFL-CIO's Clark is complaining publicly because labor was excluded from the negotiations.

"If labor blocks this, it will just be because they were not included," Wroten says. "Anytime you get labor and the chamber in the same room, you encounter a lot of problems we didn't need."

Wilson says "labor ought to be pleased" with the compromise because it means "the guy who gets hurt will get more money."

The senator believes the commission should move quickly into a utilization review process after adopting a fee schedule. Such a process would establish an average cost for each procedure and police possible abuses. Although he has defended Patterson's recommendation s in the past, Wilson now concedes that "maybe it limited |fees~ too much."

The negotiated agreement calls for "appropriate peer review committees."

The State Chamber of Commerce and the Arkansas Medical Society want their fee schedule tried for two years, though, and then "sunset" if they don't agree to extend it.

Wroten was the first public speaker at the May 12 hearing. His news of the society's agreement with the State Chamber of Commerce hit like a bombshell.

The agreement, Wroten says, was reached only a week before the hearing. He claims there was no time to distribute copies of it.

Insurance industry officials came to the hearing ready to support Patterson's recommendation. Most said they were surprised by the agreement and unprepared to comment on it.

Mark Skinner, speaking for 252 companies that write half the workmen's compensation coverage in Arkansas, told the commission he had come to the hearing to support its proposed fee schedule and was "somewhat frustrated ... I don't know exactly where to direct my comments."

Skinner says parts of the agreement could lead to litigation. It also would be "inappropriate" for the commission to agree to the two-year "sunset" feature, he says.

Under the compromise between the State Chamber of Commerce and the Arkansas Medical Society:

* Maximum fees are set for 260 codes, representing 80 to 90 percent of the medical codes used to report workmen's compensation claims. Reimbursement is the lesser of the fee schedule amount or the physician's usual charge.

* Fees were developed after comparing various sources, including Blue Cross & Blue Shield, a large multispecialty clinic and an orthopedic clinic (both in Arkansas) and a new scale developed at Harvard University in Cambridge, Mass.

* Nothing precludes filing for modifiers to treat unusual cases.

* Radiology and pathology fees contain two components, one for physician services and the other for technical aspects such as supplies, equipment and facility costs. They may be billed together or separately. The average percentage is based on various sources.

* Reductions below the Blue Cross & Blue Shield schedule range from 1 percent for pathology services to 8 percent for surgery. But treatment for carpal tunnel syndrome, a disease that plagues the poultry processing industry because of the repetitive movements workers must make, would be reduced from $1,300 to $900.

* Most major carriers, including Medicare, use the point system for anesthesiology developed by the American Society of Anesthesiologists. The compromise accepts $30 per point, as does the Blue Cross & Blue Shield schedule.

* Reports required from employers and insurers are not part of routine services for other patients. As a trade-off for lower workmen's compensation fees, physicians could charge fees of $35 for the initial report, $10 for subsequent reports and $25 for the final report.

* The commission is asked to adopt a rule requiring that when a joint petition case is settled, the attorney for the employee is obligated to pay all medical expenses directly from the settlement. This is designed to eliminate what the medical sector views as lengthy delays in payments to physicians.

Patterson's final warning at the May 12 hearing was that no matter what fee schedule is adopted, it alone won't solve Arkansas' workmen's compensation crisis.

Utilization review and monitoring to head off abuse are needed along with prompt claims payments by insurance companies, according to Patterson.

"Everybody has to be a willing participant to make it work," Patterson says.

If the workmen's compensation crisis is not resolved, Patterson predicts that economic development in the state will be "severely jeopardized."
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Author:Griffee, Carol
Publication:Arkansas Business
Date:May 25, 1992
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