The Minnesota legislature passed a new law which requires that payments to hospitals for inpatient treatment are now based on Medicare's lower Diagnosis Related Group reimbursements, not on a hospital's usual and customary charge. The bill (HF2193/ SF2056) was signed by Gov. Mark Dayton and goes into effective January 1, 2016.
According to Minnesota Insurance Journal's July 2015 issue, "The law addresses an issue that got it's start in a 1992 law change through which hospitals in the state agreed to charge a maximum of 85 percent of their customary fees to treat patients coming from the work comp system. A problem ensued because while the percentage was capped, the fees were not. That eventually became problematic for employers because through negotiations over time, Medicaid, Medicare and private health insurers had effectively capped what hospitals would charge their patients. Consequently, the uncapped fees hospitals could charge workers' comp patients became a steady and (although only about four percent of total revenues) important stream of rising income for hospitals.
Eventually, the gap widened to the point where even politicians
were acknowledging that something had to be done. For more than
a decade however, hospitals used a strong lobbying effort to with-
stand those demands.
But just as rising costs for employees' health care eventually resulted in laws to rein in that sector, it had become increasingly clear that in Minnesota employers eventually would be unable to continue paying for worker's comp because of its growing medical component.
Under the new law, effective Jan. 1, hospitals will wind up reducing, by 10 percent, the cost of inpatient care for work comp patients. The cost saving for outpatients (three quarters of the injured workers in the system) will be determined in the 2016 legislative session, and politicians are confident the savings there will be similar."
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Information gathered from Minnesota Insurance Journal, July 2015
