HB 141-WORKERS' COMPENSATION MEDICAL FEES  4:18:29 PM CHAIR OLSON announced that the final order of business would be HOUSE BILL NO. 141, "An Act setting the fee for medical treatment or services performed outside the state under the Alaska Workers' Compensation Act, requiring a provider of medical treatment or services under the Alaska Workers' Compensation Act to submit bills for treatment or services to employers within 180 days after the date the treatment or services are rendered, and limiting the time for appealing an employer's denial or reduction of a bill; and providing for an effective date." 4:18:54 PM REPRESENTATIVE JOSEPHSON declared a conflict of interest. He stated that he has an ongoing workers' compensation claim that is unresolved. CHAIR OLSON asked whether the case is an out-of-state claim. REPRESENTATIVE JOSEPHSON answered yes. CHAIR OLSON responded that he did not think any conflict of interest exists. 4:19:20 PM CHAIR OLSON stated that the committee will be reviewing the original bill rather than a proposed amendment [not offered, but in members' packets]. The bill contains "180 days versus 45 or 90 days," which will make sense to some public members listening today. He explained that the difference in that breakdown was not significant to the overall goal of the bill and the proposed changes could have further complicated matters which might have adversely impacted Alaska's hospitals more than out-of-state hospitals. 4:19:53 PM ANNA LATHAM, Staff, Representative Kurt Olson, Alaska State Legislature, read the bill title, as follows: An Act setting the fee for medical treatment or services performed outside the state under the Alaska Workers' Compensation Act, requiring a provider of medical treatment or services under the Alaska Workers' Compensation Act to submit bills for treatment or services to employers within 180 days after the date the treatment or services are rendered, and limiting the time for appealing an employer's denial or reduction of a bill; and providing for an effective date. MS. LATHAM explained that HB 141 does two things. First, the bill will set the fee schedule for workers' compensation claims treated outside Alaska. Second, the bill establishes workers' compensation billing timelines. She provided background information, including that in 2011, the legislature passed House Bill 13, which established a comprehensive workers' compensation fee schedule. The schedule couldn't exceed usual, customary, and reasonable (UCR) rates, based on the UCR fee schedule and was reflective of the geographical areas for the services rendered at the 90th percentile. However, the aforementioned bill failed to identify any parameters for locations for which the fee schedule could be used. She reported that Alaska has the highest workers' compensation rates in the nation. Since 1986, the Oregon Department of Business and Consumer Services has conducted a biennial study that is considered the industry standard. Unfortunately, for the past ten years, Alaska has been ranked in the first or second place for the highest workers' compensation insurance premium rates in the nation. 4:21:44 PM MS. LATHAM provided some discrepancies between Alaska's rates and those in the Lower 48. She drew attention to the top 25 procedure codes in members' packets entitled, "Top 25 Surgery Procedure Codes Ranked by Paid Amounts (47% of total surgical payments)" and asked members to compare Alaska's workers' compensation fee schedule to Washington, Oregon, and Idaho's fee schedules. While rates vary somewhat, Alaska's rates are extremely high. She referred to page 40 of the report entitled, "Medical Data Report for the state of Alaska dated September 2013." She explained that this chart ranks the top ten diagnostic codes by total claim payments and the International Classification of Diseases (ICD-9) codes by total claim payments. She specifically referred to the ICD-9 code 722.10 for displacement of lumbar intervertebral disc without myelopathy [at the bottom of page 40], and pointed out that the National Council on Compensation Insurance (NCCI) indicated that the average payment in Alaska at $31,177 compared to $17,049 nationwide. She reported that this represents a $14,128 cost difference for only one procedure, noting Alaska's rates are 182 percent higher than the national average. Further, nothing in Alaska's statutes prevents a claim treated outside Alaska from being billed at Alaska's rates; however, HB 141 would change that practice. Medical services treated in Alaska would be charged using the UCR fee schedule established in 2001. Any medical services treated outside Alaska couldn't exceed the charges set by the workers' compensation statutes of the state where services were rendered. MS. LATHAM said the bill would also set billing timelines and require a provider submit bills for treatment to employers within 180 days after the date the treatment is rendered. It would also limit time to appeal an employer's denial of a reduction of a bill to 60 days. The bill has an immediate effective date and contains a retroactivity clause, as well as transition language. The transition language allows medical providers to submit bills for service within 180 days of the effective date, irrespective of the date of service, and allows providers to submit an appeal for denied payment within 60 days of the effective date. She summarized that HB 141 will set reasonable timelines for billings, provides certainty for employers and insurers, fixes some loopholes in House Bill 13, and makes incremental changes to existing statutes. These changes should provide stability and prevent further increases to workers' compensation insurance rates. 4:24:39 PM REPRESENTATIVE JOSEPHSON pointed out that the high cost of medicine and the 182 percent disparity goes far to address Alaska's high premium rates. MS. LATHAM agreed premium rates are an issue. CHAIR OLSON said medical costs are approximately 80 percent of the amount paid on workers' compensation cases. The costs are significant. He informed members that the committee will consider three additional workers' compensation bills that could impact workers' compensation laws. This bill provides the "first leg" of the stool. He offered his belief that when the bills are considered in their entirety, they could provide consumers some reasonable savings. He advised members that he has held discussions with the national organization that sets rates, NCCI, and if the bills pass the state will move in the right direction. He said he would be happy with a 15-20 percent reduction in insurance rates, which has happened in other states that have implemented serious reform. Again, he cautioned that this bill is only one segment. He reported that about 20 percent of the workers' compensation injuries are treated outside Alaska. He explained that this issue arose when an original billing used a lower rate [based on the Lower 48 state's rate], but once an audit was done, the claim was subsequently rebilled [using Alaska's higher rate]. However, the Alaskans were treated in the Lower 48 state and not in Alaska. 4:27:10 PM REPRESENTATIVE JOSEPHSON appreciated the explanation. He asked whether the medical providers find 60 days to be sufficient to appeal or reject a bill. He added that he represents the business interests of most of the medical community in his district. MS. LATHAM said the sponsor has not received any letters from the medical community. CHAIR OLSON remarked that the bill was introduced last legislative session. 4:28:14 PM REPRESENTATIVE HERRON asked how many states have a provision that allows them to bill at the Alaska rate rather than using their own workers' compensation rates. MS. LATHAM answered none. She explained that states use one of two fee schedules, either the UCR or else a Resource Based Relative Value Scale (RBRVS), noting 43 states have adopted one of the two schedules. Additionally, some states have reciprocal agreements with other states, but to her knowledge no other state has adopted this approach. 4:29:02 PM REPRESENTATIVE HERRON asked how much money the state has lost in the past few years because of the workers' compensation billing practices used by other states. MS. LATHAM answered that she did not have any quantifiable data; however, she offered to provide data on cases that have been "back billed." She reported that about 24 percent of workers' compensation cases seek treatment outside Alaska. CHAIR OLSON estimated the companies impacted probably represent approximately 80 percent of the workers' compensation premiums in the state. He characterized this as a "right and wrong" issue since the claims are initially billed out for an Alaska patient being treated outside Alaska. This bill attempts to try to fix an "abuse" of the system issue. REPRESENTATIVE HERRON agreed. He thought it was appropriate and also characterized the current practice as "a matter of right and wrong." 4:30:40 PM MICHAEL MONAGLE, Director, Central Office, Division of Workers' Compensation, Department of Labor & Workforce Development, in response to Chair Olson's question, on whether the division tracks the percentage of claims being treated outside Alaska, answered no. He explained that the National Council on Compensation Insurance (NCCI) began a medical data call several years ago. The NCCI released its first data cut for Alaska in January 2013, with a follow-up report in September 2013. He reported that the NCCI's figures show that 24 percent bills are out-of-state billings. He stated that the division performs a cost of living adjustment every three years. Additionally, the division extracts the numbers of people living outside Alaska and he reported that approximately 300 claimants are currently receiving ongoing benefits out-of-state, but in most instances people are treated out-of-state and return to Alaska. He did not believe that the aforementioned Alaska residents are permanently residing outside Alaska. 4:32:51 PM REPRESENTATIVE JOSEPHSON asked whether the department is concerned about bills that may be lost due to clerical errors or third-party payer systems, relative to the 60-day deadline. For example, part of the HB 141 is designed to respond to a recent Seattle decision in which the courts ordered that a $199,000 workers' compensation bill be paid. He remarked that is a big bill to have "lost in the mail." He wondered if the provider should receive certified mail. MR. MONAGLE said the division rarely reviews medical records since the billing is between the provider and the payer. The division receives medical records when there is a dispute between the provider and the payer, either through a reduction or a denial of the bill. In those instances the provider will come before the Workers' Compensation board to file a claim. 4:34:32 PM REPRESENTATIVE JOSEPHSON characterized the division as serving as a referee in disputes. MR. MONAGLE answered yes; that the division serves as a records' custodian and keep case files for the 19,000 reports of workers' compensation injuries and the subsequent reports as well as administering the adjudication process when disputes occur. 4:35:06 PM JULIE CISCO, Risk Manager, Kenai Peninsula Borough School District (KPBSD), referred to a letter in members' packets from Dave Jones, Assistant Superintendent of the KPBSD. She reported that the KPBSD's per claim costs have increased approximately 400 percent in the past four years, of which approximately 80 percent is for medical cost. The school district needs some way to contain costs. In the past, one option was to send people out-of-state for treatment and pay the lower state fees. That option vanished several years ago when a Lower 48 hospital discovered a loophole and re-billed the KPBSD for several years' worth of procedures. She urged members to support HB 141. CHAIR OLSON asked whether the KPBSD is a member of a pool or if the borough is a qualified self-insurer. 4:36:48 PM MS. CISCO answered that the KPBSD is self-insured for the first $250,000 per claim, but above that the district buys excess insurance through the Alaska Municipal League's (AML) pool. CHAIR OLSON said that explains why the KPBSD has been tracking the claims so closely. MS. CISCO agreed; noting that this represents "first dollar" for the first $250,000, without any aggregate limit. Thus, the KPBSD could have 100 claims breach that limit. 4:37:14 PM CHAIR OLSON highlighted that in the past couple of weeks that his office has been contacted by a number of self-insurers or pool members with a large retention who have been "hit" by outside hospitals so it is not just primary insurers who have been adversely affected. 4:37:39 PM SALLY STUVEK, Human Resources Director, Fairbanks North Star Borough (FNSB), said she oversees risk management, which handles workers' compensation for the FNSB and the FNSB School District (FNSBSD). The combined plans for the FNSB and the school district's workers' compensation plan is a self-funded program. She reported that the FNSB spends approximately $1 million on workers' compensation benefits. The FNSB continues to see medical costs increase. The regulation of fees and charges for medical treatment, medical equipment, and prescription drugs would reduce overall workers' compensation costs. She stated that assuring a schedule for out-of-state provided service would have a positive impact on the overall costs for workers' compensation. She said the administration of the FNSB fully supports the components listed in HB 141. She concluded her testimony by reporting that the FNSB assembly will consider a resolution on February 13, 2014. She offered her belief that this bill creates a reasonable timelines for billing services and for the appeal period. CHAIR OLSON, after first determining no one else wished to testify, closed public testimony on HB 141. 4:39:39 PM REPRESENTATIVE JOSEPHSON offered his sense that HB 141 makes positive adjustments to existing practice. He noted that subsection (f) of the aforementioned statute, makes it clear that if something is a covered event under the workers' compensation law, such that any delay by the provider submitting the bill can't fall on the worker. CHAIR OLSON indicated Mr. Monagle has nodded yes. 4:40:39 PM REPRESENTATIVE JOSEPHSON referred to decision he previously read the Barrington decision [Alaska Workers' Compensation Appeals Commission - Dr. Edward Barrington, Appellant, vs. Final Decision February 12, 2007] that makes it a little murky, but ultimately reaches that conclusion. He said that sometimes a provider doesn't know a settlement has occurred. He remarked that HB 141 is simple enough; however, the law of workers' compensation, including regulations and procedures is "utterly complicated." Thus, even though HB 141 looks straightforward, it isn't clear how the bill will ultimately affect the outcome; although it seemed reasonable that six months will allow sufficient time for providers to submit a bill. He further noted that a worker is still allowed to go to the nearest point for adequate help even if it is in California. He offered his belief that Alaska is improving [in providing all types of medical procedures], especially in Anchorage. 4:42:04 PM REPRESENTATIVE REINBOLD moved to report HB 141 out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, HB 141 was reported from the House Labor and Commerce Standing Committee.