OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http://www.cga.ct.gov/ofa

sSB-61

AN ACT CONCERNING WORKERS' COMPENSATION AND LIABILITY FOR HOSPITAL AND AMBULATORY SURGICAL CENTER SERVICES.

As Amended by Senate "A" (LCO 5116)

Senate Calendar No.: 195


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 15 $

FY 16 $

UConn Health Ctr.

Operating Fund- Indeterminate

Indeterminate

Indeterminate

Various State Agencies

GF, TF - Indeterminate

Indeterminate

Indeterminate

Workers' Compensation Commission

Workers' Compensation Fund- Cost

$25,000 to $50,000

$10,000

Municipal Impact:

Municipalities

Effect

FY 15 $

FY 16 $

Various Municipalities

Indeterminate

Indeterminate

Indeterminate

Explanation

The bill may result in a fiscal impact to the state and municipalities' workers' compensation programs and the University of Connecticut Health Center (UCHC), which is indeterminate. The bill will result in a cost to the Workers' Compensation Commission (WCC) of $25,000 to $50,000 in FY 15 and approximately $10,000 annually thereafter.

The bill changes how default reimbursement rates for hospitals and ambulatory surgical centers (ASC) within the workers' compensation system are determined. It is uncertain what the fiscal impact to the state or municipalities' workers' compensation programs will be, as hospital data is currently reported to the state workers' compensation program in a format inconsistent with Medicare rates1 and therefore a crosswalk between current rates and the Medicare rates which will be the basis of the reimbursement formula established in the bill, is not currently available.

The bill replaces the current default hospital reimbursement rates for workers' compensation of “actual cost,” which is not currently defined in statute. The bill instead requires the WCC chairman, in consultation with various stakeholders, to (1) establish and annually publish Medicare-based formulas for determining reimbursement rates for those services covered by Medicare, and caps the default rates at the reimbursements listed in the formula and (2) set rates for those services not covered by Medicare.

The WCC will incur a one-time cost of $25,000 to $50,000 to establish the Medicare-based formulas and fee schedule. The WCC will incur an annual on-going cost, starting in FY 16 of approximately $10,000 to provide the annual update to the formulas. The fiscal impact is based on the costs incurred by the WCC to establish and maintain the physicians' fee schedule.

In practice, the state and many municipalities currently negotiate a discount off the invoiced amount directly with the hospital; this negotiated price forms the current reimbursement platform for the state and municipalities' workers' compensation programs. The invoiced value is based on a hospital generated “master charge list”.2 The bill allows the state and municipalities to continue the practice of negotiating rates with hospitals and ambulatory surgical centers or use the default rates established by the new formulas or fee schedule.

In contrast, Medicare sets a base hospital reimbursement rate for all procedures to which weights are applied based on the procedure and geographical region of the facility. Medicare changes reimbursement rates multiple times a year; many states who reimburse workers' compensation hospital services as a percentage of Medicare, set their rates annually. The fiscal impact to the state and municipal plans will depend on the difference between the current negotiated rates and (1) the reimbursement provided by the formula or (2) the rate established by the chairman.

The bill may result in a fiscal impact to the clinical operations of the UCHC if (1) Medicare based reimbursement rates or (2) the fee schedule established by the chairman are different than current negotiated rates. The impact will depend on the number of workers' compensation patients seen in a given year, which cannot be predicted.

Senate “A” struck the underlying bill and its associated fiscal impact. The amendment resulted in the fiscal impact described above.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

The preceding Fiscal Impact statement is prepared for the benefit of the members of the General Assembly, solely for the purposes of information, summarization and explanation and does not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.

1 In general hospital information is reported using revenue codes and Medicare information is reported using diagnostic related groups (DRGs).

2 Hospital master charge lists are currently filed with the state's Office of Health Care Access.