Typo in regulation costs Kansas hospital $600K

Via Christi Hospital in Wichita, Kan., is out nearly $600,000 for the cost of treating a patient after the state's supreme court held Nov. 1 that a typo in Kansas' workers' compensation medical fee schedule is to be considered the "plain language" of the regulation.

In 2011, a man who was severely burned while at work received medical treatment at Via Christi. The total billed amount for his care was $1.05 million. The patient's employer's workers compensation insurance carrier was Travelers Indemnity Co. of America. Travelers contracted with Paradigm, which specializes in complex workers compensation cases, to assume its obligations for the patient's medical needs. Paradigm paid Via Christi $136,451, which it claimed was payment in full under the state's workers' compensation medical fee schedule.

The Kansas Division of Workers Compensation created a "stop-loss" provision in its fee schedule in 2010. The provision stated that if the total charges for an inpatient hospital stay totaled $60,000 or more, those charges were multiplied by 70 percent to determine the allowed reimbursement. If the charges did not reach the $60,000 stop-loss threshold, hospitals were reimbursed using the Medicare Severity-Diagnosis Related Group method, which had previously been used.

In 2011, the maximum fee schedule included the following sentence: "If the MS-DRG level of reimbursement exceeds the $60,000 stop-loss threshold, the facility shall be paid billed charges multiplied by 70% or the MS-DRG level whichever is least; all other rules apply to making this determination." The "whichever is least" language was included in the 2011 maximum fee schedule by accident and without the knowledge of the director of the Kansas Division of Workers Compensation or its appointed medical administrator.

The words "whichever is least" is what led to the dispute between Via Christi and Paradigm, as Paradigm relied on the language to lower its payment to the hospital. Via Christi argued that Paradigm should have paid $732,426 —70 percent of the billed charges — or an additional $595,975 because the "whichever is least" amending language was accidentally included.

When Via Christi brought the dispute over the bill to an informal hearing, the division's director agreed with Via Christi that the language was erroneously included. However, he held that a hearing officer did not have the authority to strike the language. The hospital appealed the decision to the board within the division, which also concluded the language was accidentally included but that it had no authority to void the language in the hospital's favor.

Via Christi then took the dispute to the state's court of appeals, which ruled in favor of the hospital, effectively holding that the court had the authority to declare the board's enforcement of the improperly promulgated amendment to the 2011 maximum fee schedule to be unreasonable, arbitrary or capricious.

Paradigm brought the case before the Kansas Supreme Court, which reversed the decision of the court of the appeals.

The supreme court concluded, relying on the language of the fee dispute statute, that the issue of rulemaking by the director of the Division of Workers Compensation — and the results of any accidental rulemaking — should not have been brought before the board on appeal from the hearing officer.

"Similarly, when the board upheld the plain language ("whichever is least") of the 2011 maximum fee schedule created under the director's statutory authority, we fail to see how its enforcement of that schedule is unreasonable, arbitrary, or capricious," reads the opinion.

Access the full opinion here.

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