Bulletin 97-2
January 3, 1997


Workers' Compensation Inpatient Hospital Fee Schedule To Be Implemented April 1, 1997

A fee schedule establishing maximum charges for inpatient hospital services not provided under contract has been adopted by the Division of Workers' Compensation.

In order to provide ample lead time for hospitals and claims administrators, the Division of Workers' Compensation has set the implementation date for April 1, 1997. Only hospital admissions on or after this date will be covered, according to DWC Administrative Director Casey L. Young.

Outpatient services provided by hospitals are already covered by DWC's Official Medical Fee. The requirement to create a fee schedule for inpatient services was one of the elements of the 1993 workers' compensation reform package.

A major goal in developing the new fee schedule was to make it as administratively simple as possible, according to Young. "Unfortunately, the authorizing statute required us to consider cost and service differentials for various types of facilities as in Medicare, severely limiting our options," he said. "This schedule is the most administratively simple one we could construct given the statutory constraints."

In essence, the schedule provides that the maximum payment for each hospitalization is calculated by multiplying two factors: a constant figure, known as a "composite factor," which is assigned to each hospital, and a variable "weight" based on the diagnosis of the injury. These factors are derived from Medicare, except that revised weights were calculated for the most common diagnoses for workers' compensation patients to reflect the younger, more active workers' compensation population. The maximum payment is 120 percent of the product of the two factors reflecting the diagnosis and the hospital at which the treatment was rendered.

This schedule is based on the federal Medicare model, Young said, because it is the only one that meets the statutory requirements and provides the necessary information each year to update it. To ease the administration of this schedule, each year DWC will publish the factors, weights and other information necessary to calculate the maximum payments.

Young emphasized, "It is important to underline that the new schedule establishes maximum fees for non contracted inpatient hospital services. It will still be possible to negotiate contracts with hospitals for a lesser amount, or on a per diem or other basis. If a negotiated contract applies to an inpatient hospital service, the contract supersedes the fee schedule. We expect contracts will continue to play a significant role in determining compensation for inpatient hospital services."

The information necessary to calculate payments may be obtained in two ways. Interested parties will be able to download it directly from the Division of Workers' Compensation's web site or order it by mail. A hard copy may also be obtained by writing: Division of Workers' Compensation, P.O. Box 420603, Suite 3160, San Francisco, CA 94142.

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(((NOTE: A question and answer style fact sheet with most commonly asked questions regarding the fee schedule is attached to this Newsline.