The Office of Inspector General (OIG) recently investigated Medicare and Medicaid medical providers suspected of overbilling the system by using billing override code 59. Code 59 is just one of 35 different coding edits used to bypass Medicare’s National Correct Coding InitiativeThe OIG audit showed that 40% of all code pairs billed with the code 59 modifier resulted in overpayments to medical providers. And these overpayments totaled $59 million. Worse yet, code 59 is just one of 35 modifiers used to override coding edits on bills submitted. The OIG audit also indicated that computer billing programs did not detect overbilling errors cause by the use of these modifiers. The errors were only found in the rare instance that the bill was reviewed independently by a human being. We all know that there is fraud in the government medical systems, but what does that have to do with you and your workers compensation insurance rates?
In North Carolina, workers compensation policies are experience rated policies. This means that your claims experience, either good or bad, will affect the rates that you pay each year. This is accomplished through the use of an experience modification factor on each policy. Your experience modification factor, referred to in the business as your mod, is an extra multiplier on your rate. Good loss experience over time can result in a modifier that is less than 1. When that happens it means that you are receiving a discounted rate below what you would have otherwise had without the excellent record. But when your mod increases to numbers above 1.0, then you are paying an more for your workers compensation policy due to your past claims experience. Experience mods are calculated based on the frequency and severity of claims. So if you can avoid severe losses and reduce the amount that is paid out, then you can help to keep your experience modification factor lower. It is an important maxim to remember that money paid out for your workers compensation claims is almost always going to cost you more in premiums later. So you must do all that you can to reduce and control workers compensation losses.
Here are some important facts to keep in mind. First, workers compensation insurance companies face the same mult-billion dollar challenges as the Medicare and Medicaid system face when it comes to avoiding fraud and billing errors. Most workers compensation insurance companies rely solely on computer technology to find and correct billing errors and most do not conduct reviews of modifier 59. More often than not, they just apply the fee schedule discount and pay the bill without investigating the accuracy of the medical bill.
So what can a business owner do to protect his or her business from intentional and unintentional billing errors that will mean rate increases in the future? The best plan of action is to carefully select the insurance company you buy your work comp insurance policy from in the first place. I generally recommend that businesses buy their workers compensation insurance policy from a company that writes workers compensation insurance only. These specialty companies tend to have lower rates to begin with, but beyond that, since workers compensation claims are the only type that they handle, they generally have a better system for watching for fraud in the billing process. They also will often provide on staff nurses to manage a case as well as more systematic and careful review of all medical bills. Thes additional claims services will almost always result in lower claims costs and will generally get your injured employees back to work sooner. These techniques will not only show up in lower initial rates, but will also help you keep your experience modification factor lower, thus keeping your costs lower over time.
At Clinard Insurance Group, we are an independent insurance agency that is actively engaged in helping businesses all across North Carolina with their work comp and business insurance. We can show you how to cut your workers compensation costs dramatically with very little effort on your part. If you have questions about your business insurance policies, please call us, toll free, at 877-687-7557 or visit us on the web at www.ClinardInsurance.com.
The Insurance Answer Guy 