Oregon workers’ comp rule hidden behind veil of secrecy
By ANNE SAKER
The Portland Oregonian
Monday, July 28, 2008 10:15 AM PDT
PORTLAND — To engineer a major change in how doctors are paid to treat injured workers, state officials acted under pressure from a private insurer, with a lot of haste, little public comment and no official legal guidance.
The emergency temporary change occurred because a single national health care company, suffering financial problems, sent word through the insurer that without the change, the company would pull its business out of Oregon. In a phone call that the insurer, Liberty Northwest, set up in early June, a state official spoke to the company, and three weeks later, the official issued an emergency rule that gave the company and the insurer what they wanted.
This month, doctors who treat injured workers have criticized the Workers’ Compensation Division for skirting public debate to protect the insurer. The doctors say that by effectively lowering their payments, the rule will drive more of them out of the shrinking pool of medical providers willing to take on the complex and paperwork-intensive cases.
John Shilts, the division director, said he made the rule change July 7 in response to the company’s threat to leave the state. Shilts said that when he changed the rule he didn’t know how much business the company did in Oregon or what effect a pullout would have. Even after the rule change, he said, he didn’t know those factors, “but the fear was that such an action would have a huge impact on health care in all of Oregon.”
Shilts said some division employees feared that if the company, Coventry Health Care, left the state, the insurance premiums that employers pay for workers’ compensation would rise. Shilts said his staffers offered no data to support their worries. He said the attorney general’s office sent an e-mail giving the agency legal arguments supporting the rule change. The agency, citing attorney-client privilege, would not produce the e-mail.
Doctors and people who represent them acknowledge Shilts’ authority to issue emergency rules. They are, however, perplexed by the speed and secrecy with which Shilts changed this rule, given the stakes: the care of injured workers.
“This is just totally contrary to everyone’s understanding of how the workers’ compensation structure works,” said Scott Gallant, legislative director for the Oregon Medical Association. Gallant said that in more than 27 years of watching workers’ compensation, he has never seen anything like this emergency rule. He and others called it nothing less than a reworking of the system constructed in the 1990 deal called the Mahonia Hall agreement. They said the rule could force doctors to stop taking injured workers as patients because they will lose too much money on each case.
“It’s going to be a terrible thing to try to get care,” said Tigard orthopedic surgeon Ron Bowman, chairman of the medical advisory committee to the Workers’ Compensation Division.
Bowman said he had no idea the division was thinking about the rule change until about a week before it was issued. He said Shilts’ reason for moving quickly -- the threat from the company -- “reeks of collusion.”
Shilts said the doctors are overreacting. The rule change simply brings Oregon current with the market, he said.
Plus, he said, a 180-day clock now is running for the division and stakeholders to “dig into the issue and really tie down what this policy is going to be” in a permanent rule.
“Will we get it exactly right in six months? I hope so, but I don’t know. A lot of rules are done and redone,” he said.
How the system works
Here is the root of the issue:
Workers’ compensation is separate legally, medically and administratively from the general health care apparatus. Its purpose is narrow: to get an injured worker back on the job. Employers pay for all care by insuring themselves or by buying private insurance. In general, workers can go to any doctor, and they pay nothing out of pocket for treatment.
As with other health care, workers’ compensation costs have risen. The Mahonia Hall agreement addressed that by allowing insurers to direct an injured worker into a managed-care organization regulated by the state.
The 1990 agreement paid doctors more than for general health care to cover the paperwork and oversight burden of caring for an injured worker.
Soon after the ink dried on the 1990 rewrite, the nation’s general health care system saw another change: the rise of “preferred provider organizations.” A PPO channels patients into a network of doctors by offering them incentives such as lower out-of-pocket payments. In exchange for the volume business, doctors sign contracts to discount their fees.
Some PPO contracts specify that discounts would apply in workers’ compensation cases, even though the PPO does not boost the doctors’ business by channeling more patients to them.
The problem, then, is whether PPOs and the insurance companies can impose the discounts on doctors in workers’ comp cases. A nationwide debate has already begun: In the past three years, California, Idaho, Ohio, Colorado and other states have taken legislative or regulatory action to control such PPO discounting.
Change in payments
Last year, Oregon doctors and physical therapists noticed that insurers were applying PPO discounts to their workers’ compensation claims. When Rich Katz, who runs a Portland physical therapy center, discovered the discounts, he asked the Workers’ Compensation Division for advice.
On Jan. 8, Debra Buchanan, the agency’s manager of resolutions, replied in writing that PPO discounts were not mentioned in the law, and she suggested that Katz consult a lawyer, which he did.
In the spring, Diana Godwin, a Portland lawyer who represents caregivers, filed 50 complaints with the division demanding repayments, mainly from Coventry, a Bethesda, Md., PPO that has struggled financially.
The division decided in favor of Godwin’s clients, which would have compelled Coventry to pay the doctors what they billed. Coventry appealed those decisions.
Then the company and Liberty Northwest argued that PPO discounts were legal because state law did not prohibit them, and if Coventry were compelled to repay doctors, it would withdraw from Oregon.
Officials for Coventry and Liberty Northwest did not return repeated telephone calls seeking information and comment on the issue.
Emergency rule
In late May, Gary Kentner, a Liberty vice president, e-mailed Shilts to arrange a conference call among Kentner, Shilts and Coventry officials.
On June 11, the day before the conference call, Shilts e-mailed Kentner to say he discussed the PPO discounts with Cory Streisinger, director of the Cabinet-level Department of Consumer and Business Services and his boss.
“She has some ideas about how we might be able to accelerate the rule-making process,” Shilts wrote. “Cory supports the idea that the PPO contracts ought to apply in disputes, as I do. I’ll discuss this in our call tomorrow.”
Ninety minutes after the June 12 conference call with Coventry officials, Kentner wrote to Shilts: “The discussion today went a long ways toward raising their comfort level.”
On July 7, Shilts issued the emergency rule allowing insurers to apply PPO discounts to medical care payments in workers’ compensation cases. When doctors and lawyers complained, he said that since PPO discounts are now part of the health care financing landscape, the rule simply brought Oregon’s law up to date.
