California Hospitals Received Duplicate Payments for Spinal Surgeries

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A recent report from the California Workers' Compensation Institute turned a critical eye toward the California workers' compensation inpatient hospital fee schedule, as it found California hospitals received roughly $67.5 million in duplicate payments in 2010 for injured workers who received certain types of spine surgeries.

Under the state's workers' compensation inpatient hospital fee schedule, hospitals are paid roughly 120 percent of Medicare rates for inpatient services rendered to injured workers. Furthermore, after an update to the schedule in 2003, hospitals receive a duplicate payment for separate spine implants for specific spine surgeries, and that is still the code today — although the state legislature is currently looking at repealing these "pass-through" payments.

This pass-through payment prompted a study from the CWCI. The institute found that injured worker cases had the highest average number of implant-related procedures, and more than one out of every six spinal surgeries in hospitals involved the pass-through implants in 2008.

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An estimated 3,350 California injured workers had back surgeries that involved one of the 14 spinal implant DRGs tracked in the CWCI's study in 2010, adding roughly $20,137 to each surgical procedure on average.

"While hospitals and spinal implant manufacturers continue to assert that the Medicare rates do not cover their costs, it is clear that the system of reimbursement for spinal implants under the current workers' compensation inpatient hospital fee schedule does allow for cost inflation beyond the reasonable level associated with cost recovery that was intended by the state regulations," according to the report.

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