Wednesday, May 18, 2016

Workers' Compensation Insurer Reimbursement of Trauma Care - When 100% does not equal 100%

Workers' Compensation Insurer Reimbursement of Trauma Care.
The Pennsylvania Workers' Compensation Act requires the payment of reasonable and necessary medical expenses which are causally related to a compensable work injury.  In 1993, the Act was amended to allow reimbursement of medical expenses within a "fee cap" schedule based upon the Medicare reimbursement mechanism.  The Act was amended to provide for a utilization review procedure, whereby the Employer/Insurer could challenge the "reasonableness and necessity" of the medical treatment.  The 1993 amendments also allowed review of the timeliness or amount of the medical expense reimbursement via a medical fee review procedure

Medical fee disputes may arise in the context of treatment provided at an acute care facility to an injured worker with an immediate life-threatening or urgent injury.  These medical expenses are reimbursed at 100% of the usual and customary charge for these services, as they are not subject to reduction in amount by the medical fee cap provisions. 

Geisinger Health System and Geisinger Clinic v. Bureau of Workers' Compensation Fee Review Hearing Office (SWIF) is a reported decision of a panel of the Commonwealth Court authored by Senior Judge Pellegrini on April 21, 2016.  This decision examined the rate of reimbursement for treatment of a work-related injury at a trauma center for an acute, life-threatening or urgent injury. 

 Factual and Procedural Background

The facts in Geisinger were not disputed.  The employee was injured at work when a wooden board broke and lodged near his eye.  There is no dispute that the medical treatment was at a level one trauma center for life-threatening or urgent injuries.  The Provider submitted HCFA-1500 claim forms for payment of medical treatment by the Insurer.  Provider sought payment for services rendered in a level one trauma center at its usual and customary charges, i.e. its actual charges

The Insurer responded with an explanation of benefits letter (EOB) which recognized that treatment was provided at a level one trauma center for an immediately life-threatening or urgent injury; however, the EOB further stated that payment would be made: "as such usual, customary and reasonable rates for this geographic area have been utilized as the reimbursement methodology". 

Provider filed applications for Fee Review pursuant to Section 306(f.1) of the Act.  Provider sought reimbursement based upon its actual charges.  The Insurer did not reduce these charges to the medical fee cap schedule, rather insurer provided reimbursement based upon a usual and customary database at the 85th percentile.  

Medical Fee Review Section Administrative Review

After Provider filed the Application for Fee Review with the Bureau of Workers' Compensation, the Medical Fee Review Section circulated an administrative decision which concluded that the Insurer owed the provider an additional amount of reimbursement.  The Medical Fee Review section found the treatment met the criteria for reimbursement at an acute care or trauma facility.  Reimbursement was to be made at 100% of the actual charges of a provider

Insurer filed a request for hearing for review of the Medical Fee Review Section administrative decision.  At this hearing, Insurer submitted the testimony of the re-pricing manager of its third-party vendor.  The re-pricing manager testified regarding her familiarity with the Workers' Compensation Act and the Medical Cost Containment regulations.  She explained that in review of trauma cases, rather than applying the workers' compensation claim Medical Fee Cap Schedule, she applies the usual and customary information at the 85th percentile.  This information is obtained from the FAIR Health database.  

The re-pricing manager testified that she utilized this definition of "usual and customary charge" based upon the 2011 Statement of Purpose of Adoption of Usual and Customary Charge Reference posted by the Pennsylvania Department of Labor & Industry, such that effective November 1, 2010, fee review applications would be resolved by the Department utilizing the 85th percentile of the MDR (Market Data Retrieval) database, published by Ingenix to determine the usual and customary charges defined by 34 Pa. § Section 127.3.

 Hearing Officer Determination

The Hearing Officer found the testimony of the re-pricing manager to be credible, in its entirety.  The Hearing Officer reversed the medical fee review determination.  The Hearing Officer determined Insurer properly reimbursed Provider at 100% of the usual and customary charge for services in that geographic region for the services rendered to the injured worker. 

The Hearing Officer determination was based upon the conclusion that the insurer's payment to the provider should be based upon "100% of the usual and customary charge" as defined in 34 Pa. § Section 127.3 rather than 100% of the provider's actual charge.  The definition of "usual and customary charge" at 34 Pa. Code § 127.3 was "the charge most often made by providers of similar training, experience and licensure for a specific treatment, accommodation, product or service in the geographic area or the treatment, accommodation, product or services provided." 

The Hearing Officer further explained this determination by noting that Section 306(f.1)(10) of the Act clearly states that services rendered in the trauma center shall be paid at the usual and customary rate, not at the provider's usual and customary charge or at the provider's actual charge.  Regulations Section 127.128(a) and (b) reference the term "the usual and customary rate".  Admittedly, Regulations Section 127.128(c) references "the provider's usual and customary charge".  

The Hearing Officer reasoned that the language "the usual and customary charge" appears in three sections.  There is a separate definition for "actual charge".  This led the Hearing Officer to conclude that the purpose of the regulations was to ensure proper reimbursement at 100% of the usual and customary charge for the specific treatment rendered in the geographic area where that specific treatment was provided.  It is also the purpose of the regulation so as to prevent providers from charging excessive fees for treatment and services rendered to injured workers.

Commonwealth Court Appeal of Provider

Provider appealed the determination of the Hearing Officer to the Commonwealth Court.  The Court reviewed the decision and reasoning of the hearing officer and affirmed this decision. 

The Court rejected Provider's argument that it is entitled to be reimbursed for immediately life threatening or urgent injuries at a level I trauma center at 100% of their usual and customary charge, i.e. their actual charge

The Court reasoned that the trauma center exception in Section 306(f.1)(10) of the Act states that acute care provided in a trauma or burn center to injured workers with life-threatening or urgent injuries is reimbursed at "the usual and customary charge".  The term "usual and customary charge" appears in several portions of the statute and regulations.  The Court specifically referenced 306(f.1)(3)(i) and 34 Pa. Code § 102.

The term "usual and customary charge" is defined at Section 109 of the Act "usual and customary charge means the charge most often made by providers or of similar training, experience and licensure for a specific treatment, accommodation, product or service in the geographic area where the treatment, accommodation, product or service is provided.  (76 P.S. § 29).  The Court noted Section 127.3 of the Medical Cost Containment Regulations reflects the same terminology. 

In review of the statutory construction and interpretation of the language, the Court noted that one must take into consideration the context of the language.  The Court noted that one provision, Regulation 127.128(c) utilized the definition of usual and customary charge which was synonymous with the provider's actual charge.  However, the Court noted that when a regulation is at variance with the language of the statute, the regulation is ineffective to change the statute's meaning.  Under the Rules of Statutory Construction, a defined term is to be applied unless a different meaning can be ascribed to the word or phrase because of its context.

In this case, the Court found that there was nothing in the language of Section 306(f.1)(10) of the Act that indicates that the "usual and customary charge" language is different from the definition at Section 109 of the Act, where that term is defined as "the charge most often made by providers of similar training, experience …". 

The Court affirmed the Hearing Officer determination that "the usual and customary charge" is not the equivalent of "the actual charge" of a provider. 

This decision is significant in that it clarifies that the treatment at a trauma center for acute or life-threatening care is not reimbursed at 100% of the actual charge submitted by the provider.  The correct method of reimbursement is to utilize the 85th percentile of the usual and customary database.  As a practical matter, this clarification of the required reimbursement rates for acute care may result in significant savings,  where significant treatment has been provided. 


  1. All Workers' Compensation Insurers must utilize an experienced individual (or vendor) to perform the medical expense review and re-pricing in all cases, including acute care provided at the trauma center for life-threatening or urgent injury.
  1. It is essential that a timely review is performed (within 30 days of the medical statement) and any request for a review by the Medical Fee Review Section is properly filed.
  1. Properly prepare the Explanation of Benefits (EOB) letter to the Provider consistent with Regulation 127.209.  When stating the reasons for changing the Provider's codes or reimbursement, provide a detailed written explanation.
  1. Confirm that the Provider has properly and timely filed an Application for Fee Review.  The application must be filed no more than 30 days following notification of a disputed treatment or 90 days following the original billing date of the treatment, which is the subject of the fee dispute, whichever is later.
  1. A Provider or Insurer has the right to contest an adverse administrative decision from the Medical Fee Review Section.  The contest of the administrative decision and request for hearing must be filed within 30 days of the date of the decision in the fee review.
  1. Appeal of the Hearing Officer Medical Fee Review Determination is made to the Commonwealth Court.  An appeal must be filed within 30 days of the mailing of the Hearing Officer determination.   

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