Friction Costs

A recent article in Business Insurance focused on the “friction costs” involved in paying a workers’ compensation medical bill in California. The “friction cost” in this case applied to Bill Review.

The complaining insurer noted that they were billed for $100 million but only had to pay $35 million due to Bill Review and application of the California Fee Schedule. Sounds like pretty good friction to me.

The insurance executive was exasperated that doctors routinely billed for charges way above what was allowed, even though they are aware of the Fee Schedule. “The fee schedule in California has been around a long time…Physicians know what it is, so why do they have such a hard time billing to the fee schedule?

It’s like they’re trying to slip one past the goalie …They think, if I submit a bill that’s two-thirds higher (than it should be), maybe someone will pay it.” I would ask the insurer to think about this a minute.

Physicians treat patients with a great variety of insurance coverages. Humana, Aetna, Cigna, Travelers, Liberty Mutual, Anthem, AIG, Medicare, Medicaid and on and on and on. Many physicians gave up years ago trying to keep track of the reimbursement rates for individual insurers. They bill what they want (always on the high side) and depend upon the insurance carrier to apply the right formula or rate. It seems to me this makes more sense.

At any rate, don’t short change the value of friction costs. Bill review, Utilization Review, Case Management, etc. are the techniques that cut California’s bills by 66%. That’s pretty impressive friction.

If you don’t look, you’re going to miss a tremendous amount of savings.

William Faris, JD
Chief Executive Officer
502-495-5040
william.faris@omca.biz
www.omca.biz

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