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									                      WORKERS' COMPENSATION BOARD
                     Board of Directors’ Business Meeting
                               March 25, 2008

A Business meeting of the Maine Workers’ Compensation Board of Directors was held
on Tuesday, March 25, 2008, at the Workers’ Compensation Board’s Central Office in
Augusta (located on 90 Blossom Lane).

Chairman Dionne called the meeting to order at 9:34 a.m.

                                     ROLL CALL
PRESENT: Paul Dionne (Chair), James Mingo, Gary Koocher, Joan Kirkpatrick, Anthony
Monfiletto (via telephone) and Rodney Hiltz. ABSENT: John Cooney.

                                       MINUTES
1)    Draft Minutes (Draft Minutes of March 11th): Board members received and
      approved the Draft minutes of the Business meeting they attended at the W.C.B.
      Central office, in Augusta, on March 11, 2008.

      Gary Koocher MOVED TO APPROVE THE DRAFT MINUTES OF MARCH 11TH; Rodney
      Hiltz seconded. MOTION PASSES 6-0.

                       EXECUTIVE DIRECTOR REPORT
1)    IAIABC All Committee Conference (April 7th-13th): After advising directors of
      staff’s preparation and submission of travel advance paperwork to the Department of
      Administrative and Financial Services (D.A.F.S.) for the Executive Director and Deputy
      Director of Information Management to attend the International Association of
      Industrial Accident Boards’ and Commissions’ All Committee Conference in Austin,
      Texas, the third week of April,
      Executive Director Dionne informed the Board the Department approved
      only one of the travel requests due to travel restrictions in place pursuant
      to an Executive Order and stated he is recommending the Board send
      Deputy Director Fortier to the event to attend the Association’s sessions
      being held during the conference on electronic filings that impact Maine.
                                          2


                     EXECUTIVE DIRECTOR REPORT
                            CONTINUED
IAIABC ALL COMMITTEE CONFERENCE CONT’D

     Anthony Monfiletto MOVED TO APPROVE THE OUT-OF-STATE TRAVEL COSTS FOR
     THE DEPUTY DIRECTOR OF INFORMATION MANAGEMENT TO ATTEND THE
     INTERNATIONAL ASSOCIATION OF INDUSTRIAL ACCIDENT BOARDS AND
     COMMISSIONS’ 2008 ALL COMMITTEE CONFERENCE; James Mingo seconded.
     MOTION PASSES 6-0.

2)   Reserve Account Recommendation in the WCB Audit Report by Blake,
     Hurley, McCallum and Conley: Executive Director Dionne,
     acknowledging the Board’s receipt of an Audit report from the Firm of
     Blake, Hurley, McCallum and Conley which included a recommendation
     on creating a separate account for the W.C.B. reserve account, stated
     Deputy Director of Business Services Dunn has asked the Bureau of Budget
     to implement the recommendation and informed the Board the Budget
     office has done so, and will be including information on the account in its
     next Budget.

                      GENERAL COUNSEL REPORT
1)   Pending Request for Extension of Benefits Due to Extreme Financial
     Hardship (Constance Pawlick v. S.A.D. #46): General Counsel Rohde
     informed Board members of a Motion to Dismiss that has been filed in the
     Pawlick case and of the employee’s request to have until the 9th of April
     to address the issue of compensating her for the travel expenses she will
     incur to travel from Colorado to Maine, and back to testify at the Board’s
     hearing in her case.

     Discussion:
     Directors and Staff conversed briefly with respect to General Counsel Rohde
     notifying the employee she has until the 9th of April to address the issue
     regarding her travel expenses for the hearing on the pending Request for
     Extension of Benefits and notifying the employer that they have 21 days to
     respond to the Motion to Dismiss.



                                    Minutes of Board of Director’s March 25, 2008 Business Meeting
                                            3


                       GENERAL COUNSEL REPORT
                             CONTINUED
1)   WCB Draft Rule Chapter 2 (See 39-A M.R.S.A. §152 (2); 213(2) and 213(4):
     General Counsel Rohde advised Board members that a rulemaking
     hearing was held on the 18th of March on the Board’s proposed changes
     in Chapter 2, which establish a permanent impairment threshold of 11.7%
     and to not extend the benefit limitation for 52 weeks as of January 1, 2006
     and noted the Board will accept written comments on the proposed rule
     changes until the close of business on the 28th of March.

                                 OLD BUSINESS
1)   Legislation: Following up on his recent updates regarding legislation pending during
     the Second Session of the 124th legislature, General Counsel Rohde reported
     there is no new activity to report on legislative matters since the
     Legislature is currently dealing with the State of Maine budget and
     remarked that he will provide the Board with an update at its next
     meeting.

                                 NEW BUSINESS
1)   Ingenix Report on Inpatient, Outpatient and ASC Review: Following up on the
     Board’s receipt of Ingenix’s March, 2008 report on Maine’s workers’ compensation
     inpatient, outpatient and ambulatory care facility charges, Chairman Dionne
     reported that the Board hired Ingenix to perform a study on inpatient,
     outpatient and ambulatory care charges in Maine to assist them in the
     development of a fee schedule for those charges and introduced
     Ingenix’s Senior Project Analyst, Eric Anderson, to directors, staff and
     participants and announced that Mr. Anderson attended to today’s
     meeting to present the Board with a summary, via a Power Point
     presentation, of his company’s study and recommendations regarding
     the various charges.




                                      Minutes of Board of Director’s March 25, 2008 Business Meeting
                                             4


                        NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     Discussion:
     Directors and Staff discussed Staff’s meetings with Mr. Anderson and the
     stakeholders regarding the March, 2008 report by Ingenix; Board staff meeting
     with the various stakeholders to get their feedback on the report and
     methodology and base rate options recommended by Ingenix; Board staff
     providing Board members with copies of the Ingenix report in preparation of
     today’s Board meeting and making copies of the report for the public in
     attendance; Deputy Director Inman coordinating the contract work with Ingenix
     and scheduling the various meetings with the stakeholders; Ingenix gathering a
     great deal of information from several sources as it relates to the national
     hospital environment, methodologies to consider, today’s environment and the
     data available for inpatient and outpatient charges and the implications of the
     various methods available to the Board in its development of a fee schedule for
     Maine’s hospitals and ambulatory care facilities; Mr. Anderson attending
     today’s meeting to provide Members of the Board with a summary of the
     information his Company gathered for its study and the methodologies
     available to the Board, and what other states have done with respect to
     implementing a hospital fee schedule; Mr. Anderson also providing the Board
     with information on the various methods and their long-term implications as it
     relates to the pro’s and con’s of each; today’s presentation also covering other
     issues such as base rates which will be an important issue for the Board to
     discuss and decide upon when it implements a Hospital fee schedule and Board
     staff recommending reconvening the Consensus-Based Rulemaking Committee,
     following today’s presentation to share information and to receive input from
     all of the stakeholders (Chairman Dionne explained to directors that the Board would
     like a consensus from the group but that it does not need a consensus to make a
     recommendation to the full Board).

     INTRODUCTION

     Deputy Director of Medical/Rehabilitation Services Inman reported the Board awarded
     the contract to Ingenix, following its issuance of an R.F.P., because of their
     experience, at a national level, with other states’ studies and development of fee
     schedules and stated she has been working with
     Mr. Anderson since last August. Ms. Inman also commented on the Company’s
     professionalism, expertise, and ability to gather useful and important data.

                                       Minutes of Board of Director’s March 25, 2008 Business Meeting
                        NEW BUSINESS CONTINUED
                                             5



INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D


     INTRODUCTION CON’T

     Eric Anderson, Senior Project Analyst with Ingenix, informed Board members of his
     plans to provide them with a history of the project; the national hospital environment,
     and facility environments as it relates to inpatient and outpatient services and noted
     that Maine, like other States, is not unique as it relates to what is taking place
     regarding the national trend affects as to what is happening with every state for
     hospital and facility fees. Mr. Anderson stated he has prepared a Power point
     presentation for today that covers such issues as deductible ratios; discount rates;
     cost-to-charge ratios; methodologies; Medicare issues and reimbursement processes
     and the data reviewed by Ingenix as it relates to the results of that data and the
     implications of the various methodologies, depending on what direction the Board
     chooses to go.
     Mr. Anderson apprised directors that he is also working with Montana, Idaho, Georgia
     and Mississippi on facility fee schedules and remarked that it is not as simple as just
     deciding what the best method is to use for implementing a hospital fee schedule
     because every State is different and because what works in one State may not work in
     another state, given the issues within the state itself. Mr. Anderson explained that all
     of that needs to be considered to determine the best approach with respect to what is
     fair to employees, employers, insurers, and medical facilities and providers. Mr.
     Anderson apprised directors that he has been meeting with Board staff regularly, over
     the last couple of months, to discuss the data Ingenix studied, the various methods
     available to the Board and the pro’s and con’s of those methods.
     Mr. Anderson noted there are two questions that should be addressed when
     considering the development of a fee schedule for Maine (one, what methodology
     would work best for Maine. And, two, what are the long-term implications on Maine’s
     facilities, stakeholders, and workers’ compensation claimants and noted it is
     worthwhile for the Board to review the data available for the other States, for
     comparison purposes, and for it to discuss what needs to be done with respect to the
     impact of that decision in three-to-five years with regard to improving quality of care
     and access to quality care in Maine.




                                       Minutes of Board of Director’s March 25, 2008 Business Meeting
                                              6


                         NEW BUSINESS CONTINUED

INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     INGENIX POWER POINT PRESENTATION

                                     NATIONAL TRENDS
     Mr. Anderson advised directors that before talking about the various methods and
     payments that it is helpful for the Board to understand what is occurring in the
     hospital and facility environments and stated the best way to do that is by looking at
     the national trends, which Maine’s hospitals are also affected by.
                              THE HOSPITAL ENVIRONMENT
     Mr. Anderson, noting workers’ compensation does not occur in a vacuum, stated
     that for most hospitals and outpatient facilities that workers’ compensation costs are
     only three-to-five percent of their business and that for some of them it is less than a
     half of a percent, and remarked that it is not a large component even though it is a
     major focus for workers’ compensation entities. Mr. Anderson stated that Medicare,
     however, is the largest payer in the country and is making major changes that are
     affecting hospitals – the first being CCI edits which went into affect in April of 2000
     that determine what is approved on an outpatient basis and what claims are being
     affected, and commented that those changes have had a large impact on hospitals
     throughout the country. Mr. Anderson stated some of the other changes Medicare
     instituted, such as its APC (ambulatory payment classification) payment system it
     created in August of 2000 and restructuring of its DRG inpatient payments instituted
     in 2006-2008 created a great deal of problems




                                        Minutes of Board of Director’s March 25, 2008 Business Meeting
                                              7


                         NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     INGENIX POWER POINT PRESENTATION

                                 THE HOSPITAL ENVIRONMENT
                                             CONT’D
     for major hospitals in the first couple of years. Mr. Anderson further explained
     outpatient fees and services are now reasonably stable now but that in October of last
     year Medicare restructured its DRG process for inpatient diagnostic coding for
     reimbursement purposes. Mr. Anderson noted the change resulted in more DRG
     codes and changed the way claims are getting paid. And noted that then, in January
     of 2008, after Congress felt Medicare needed to create a better system for ambulatory
     surgical centers, instituted considerable change for AFC’s (ambulatory facility charges).
     Mr. Anderson explained to Board members that there are performance issues that
     have also affected the hospital environment as it relates to third-party payers and
     Medicare, and remarked that it affects both higher-quality, and lower-quality
     hospitals. Mr. Anderson remarked that some of the major third-party payers such as
     Cigna and Aetna are also moving in that direction and pointed out that there is a
     general move to a Medicare-type system and that Ingenix has received a lot of
     requests from insurers and hospitals asking for an analysis. Mr. Anderson stated it
     has also had an impact on health insurance premiums and noted that one of the ways
     insurers is addressing the issue is by negotiating discounts with hospitals who must
     then negotiate its charges in order to stay in business because of their large, fixed
     costs such as the cost of




                                        Minutes of Board of Director’s March 25, 2008 Business Meeting
                                              8


                         NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     INGENIX POWER POINT PRESENTATION

                              THE HOSPITAL ENVIRONMENT
                                             CONT’D
     radiology and nursing staff. Mr. Anderson stated the end result is that hospitals must
     raise their charges to offset the discounts. Mr. Anderson also advised directors that
     Ingenix publishes an Almanac of Hospital Financial and Strategic Operating
     Indicators regarding the national median deductible ratio which is what hospitals tell
     Medicare they expect to actually receive from payers and noted the most recent
     publication indicates it has gone from 46 ½% to 52.2%, which effectively means that
     a hospital expects to collect 46 cents of every dollar, and noted that prior to the
     changes it collected 52 cents on every dollar charged. Mr. Anderson noted that to
     see it more clearly it is useful to look at charges in relationship to what it costs a
     hospital to perform a service and that the cost-to-charge ratio is basically a
     calculation from a Hospital’s Cost Report providing an estimate on how much it
     costs the hospital to perform a service, divided by what the hospitals charge for the
     services. Mr. Anderson explained that a measure of a hospital’s charge amount to
     the hospital’s cost of providing the service is often called the RCC or CCR (cost-to-
     charge ratio) which is a useful measure because one can calculate them since every
     hospital’s cost-to-charge ratio is calculated and published by Medicare which
     requires the cost report. Mr. Anderson noted that critical care hospitals are handled
     differently. Mr. Anderson further explained the cost-to-charge ratio allows an entity
     to see if costs are going up




                                        Minutes of Board of Director’s March 25, 2008 Business Meeting
                                              9


                         NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     INGENIX POWER POINT PRESENTATION

                              THE HOSPITAL ENVIRONMENT
                                             CONT’D
     at a faster rate than what charges are going up, or if charges are going up at a higher
     rate than what the costs are, since it provides a year-to-year comparison. Mr.
     Anderson stated that on a national basis the cost-to-charge ratio has generally been
     declining, which is true for almost every State and noted it means that charges are
     going up faster than the costs and that once again it goes back to discounts requested
     by third-party payers. Mr. Anderson summarized the information in Ingenix’s report
     on the hospital environment by providing Board members with examples on the cost
     of performing a service, such as an MRI, for years 1, 2 and 3 as it relates to the cost
     for the hospitals to perform the service as it relates to cost-to-charge ratio, and
     remarked what is happening is that hospitals are giving more discounts than what it
     is costing for services. Mr. Anderson noted that for the example he has given, that
     between 2002 and 2007 the charge for an MRI has gone up by $500 resulting in the
     net to the hospital going up by approximately $90 and the cost remaining the same.
     Mr. Anderson informed Board members that there are large incentives for hospitals
     to keep raising their charges faster than their costs because of the larger discounts.
     Mr. Anderson stated some hospitals have been penalized for unreasonably increasing
     their charges but that most have been straightforward about their charges. Mr.
     Anderson advised directors that nationally what has historically happened in the




                                        Minutes of Board of Director’s March 25, 2008 Business Meeting
                                            10


                        NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     INGENIX POWER POINT PRESENTATION

                             THE HOSPITAL ENVIRONMENT
                                      CONT’D

     workers’ compensation arena is that there are a lot of states that have, or have had a
     system that pays a percentage of the charge amount. Mr. Anderson gave Idaho as an
     example who pays a 10% discount to hospitals under 100 beds and 15% for those
     hospitals with over 100 beds. Mr. Anderson noted that system works well normally
     where the charges and costs are linked because the costs mirror what the charges are,
     and the charges mirror what the costs are. Mr. Anderson further stated what has
     happened though, because of Medicare, Medical and Third-party Insurers the
     linkage between what a hospital charges and what the hospitals’ cost is has gone
     down and that there is not nearly as much linkage between the two and that as a
     result the percentage of discount systems create problems because, unless you change
     the percentage of discount and unless you continually readjust the percentage of
     discount, that you receive the full impact of increases that are brought about due to
     the environment hospitals are working in.
     Mr. Anderson noted hospitals only have one charge for all of its patients because of
     the large number of patients they see and so if they have to raise their charges
     because insurers demand bigger discounts, that they also raise their charges for
     workers’ compensation claimants. Mr. Anderson noted Ingenix has been extremely
     busy because all States are running into this kind of problem, which is not the result
     of issues occurring within the State but because of external forces that workers’
     compensation does not control.



                                       Minutes of Board of Director’s March 25, 2008 Business Meeting
                                             11


                         NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     Discussion:
     Directors and Mr. Anderson discussed the impact of Medicare’s ASC payment
     methodology in January of 2008 on AFC’s throughout the country, some of which
     are owned by hospitals and it’s impact on both freestanding AFC’s and hospital-
     owned facilities and bad debt charity (Mr. Anderson noted that bad-debt charity
     is not as big of an issue because that actually is figured into the discount amount
     and is the amount of dollars that is actually expected to be collected).

                           INGENIX POWER POINT PRESENTATION
                                       CONT’D

                     THE BEST METHODOLOGY FOR MAINE
                 HOW ARE OTHER STATES ADDRESSING THE ISSUE

     Mr. Anderson stated there are some general consensus things that can be said about
     a successful system with respect to how would it function, and how can an entity
     make it work. Mr. Anderson explained to directors that the first thing to do is to
     keep the inequities out of the system so that patients are treated in appropriate
     settings. Mr. Anderson stated it should not be as a result of what is the best financial
     decision for any of the providers that are taking part in it, or what is best for the
     insurer and remarked it should be based on what is best for the patient. Mr.
     Anderson stated it is also desirable to eliminate bottlenecks and other inefficiencies
     to maintain the integrity of the system and to avoid adding to the costs, and to ensure
     that providers are paid fairly. Mr. Anderson stated one important point which he
     hears from all entities is that if you do not pay the providers fairly and for providing
     quality




                                        Minutes of Board of Director’s March 25, 2008 Business Meeting
                                             12


                         NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     INGENIX POWER POINT PRESENTATION

                     THE BEST METHODOLOGY FOR MAINE
                 HOW ARE OTHER STATES ADDRESSING THE ISSUE
                                  CONT’D

     care that you then have future problems for readmitting the patient, which results in
     even more costs. Mr. Anderson noted the Board wants to craft a system that payers
     can manage since whatever the system is that it needs to be clear that payers can
     manage. Mr. Anderson further noted that hospitals have more experience with
     payment systems than payers and are more experienced with the different kinds of
     payment systems because they work with them on a regular basis. Mr. Anderson
     stated it is best for the Board to develop a system that is manageable and for that it is
     important for all parties to be able to look at a rule which is clear as to what it means.
     Mr. Anderson noted it is possible for entities to reach an agreement on what the rule
     means.
     Mr. Anderson pointed out that, at the same time, the Board does not want to spend
     more on a system then what it needs to and remarked that it simply wants to pay
     providers fairly, but rationally. Mr. Anderson stated another important issue is to be
     able to maintain a system that staff can manage and noted Georgia had a system in
     which it did not update some diagnostic and procedure codes for seven or eight years
     that created some problems because the procedures and codes should have been
     updated on an annual basis, and that as a result hospitals did not get an increases for
     that many years.
     Mr. Anderson noted it is a lengthy process to update those codes.




                                        Minutes of Board of Director’s March 25, 2008 Business Meeting
                                            13


                        NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     INGENIX POWER POINT PRESENTATION


                                 POSSIBLE APPROACHES
                    COMMERICAL PAYER OR OTHER APPROACH
     Mr. Anderson informed the Board that PPO’s (preferred provider organizations)
     limit access to care, and noted it is when you send someone to a PPO that you have
     the option of going to a certain provider, especially one who offers a discount, or a
     specific hospital because they have agreed to a discount and that an individual ends
     up paying more in medical costs if they do not go to the physician or hospital. Mr.
     Anderson informed the board that there is no deductible and that you will pay more
     in deductibles and that there is no mechanism to force an injured worker to go to a
     particular doctor or hospital and remarked that patients may pay more in co-
     payments if they see the preferred providers and for that reason there are no preferred
     providers in workers’ compensation cases, since patients are not expected to pay a
     copayment and, for that reason alone, that a PPO system is not an option for
     workers’ compensation cases. Mr. Anderson, referred to his chart on the 2005
     workers’ compensation inpatient volumes on page 15 of Ingenix’s March, 2008
     report, stated the issue is inconsequential because workers’ compensation represents
     such a small portion of any hospital’s business and commented that it is very difficult
     to negotiate a volume discount when there is no volume.




                                       Minutes of Board of Director’s March 25, 2008 Business Meeting
                                             14


                         NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     INGENIX POWER POINT PRESENTATION


                            POSSIBLE APPROACHES CONT’D
                         FACILITY WORKERS’ COMPENSATION
                                   APPROACHES

     Mr. Anderson explained to directors that there are a variety of approaches used by
     other states and stated the first is a “home grown” approach, which is in place in
     New York and noted it is a convoluted and complicated system. Mr. Anderson
     advised the Board that such a system works really well because you can craft a rule
     that fits a specific solution very well but that the downside is they are usually difficult
     to maintain because it requires a certain amount of work every year to keep the
     system up to date, or else it falls away and continually needs readjusting. Mr.
     Anderson apprised directors that most states do not have sufficient staff for such a
     system and noted the Board also has the option of having no schedule, which is
     currently the case for Iowa and Missouri, and is probably the best system because it
     creates a system where no single insurer controls the marketplace, especially when
     you have insurers who represent 30-40% of the marketplace. Mr. Anderson
     explained that you the insurer then sets the price whereas if you have a competition
     you have six or eight insurers competing for business, and dozen or so hospitals
     competing for business, which will result in the market determining what the best
     rate is. Mr. Anderson explained to Board members that in some states, where there
     is good competition such as Idaho and Montana who write 80% of the




                                        Minutes of Board of Director’s March 25, 2008 Business Meeting
                                            15


                         NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     INGENIX POWER POINT PRESENTATION


                            POSSIBLE APPROACHES CONT’D
                         FACILITY WORKERS’ COMPENSATION
                                   APPROACHES

     business that it does not work well because what the big players are doing in the
     market determines what is happening in the market place. Mr. Anderson noted the
     Board also has the option of creating a percentage discount schedule such as that
     used in Idaho and Vermont. Mr. Anderson also informed the Board that Idaho is in
     the process of moving away from it for the very same reasons stated and that
     Vermont is most likely going to change to a facility schedule because of the same
     problems. Mr. Anderson explained that the problem with percentage discount
     systems is that there is no cost containment and is based on what is going on in the
     marketplace, not just workers’ compensation. Mr. Anderson explained that the
     Board can also create a standardized fee schedule system, the same type of system
     that is in place in Nebraska. Mr. Anderson advised the Board that the system works
     reasonably well because it is a home-grown system that starts with a standard,
     whether one uses a system in place with RBRVS or a different methodology, and
     explained that it starts with a standard methodology and a flat fee amount is then set,
     and that there is a difference. Mr. Anderson informed the Board that once again
     maintenance is the issue and that if there is a large system and there are a lot of
     providers in the states that then it becomes a




                                       Minutes of Board of Director’s March 25, 2008 Business Meeting
                                            16


                        NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     INGENIX POWER POINT PRESENTATION


                            POSSIBLE APPROACHES CONT’D
                        FACILITY WORKERS’ COMPENSATION
                                  APPROACHES

     maintenance issue and remarked that in Nebraska what has happened is about 90%
     of the hospitals have been added to critical access status because they are very small
     hospitals and only have about half-dozen hospitals involved. Mr. Anderson noted
     the Board can also develop a
     Percentile-reimbursement system, which is the system in place in Illinois.
     Mr. Anderson noted it is feasible to do that type of system in Maine since Maine’s
     Health Data Organization collects the data and remarked it is based on
     reimbursement and/or charge amounts, and that the problem lies in that it tends to
     be a lagging indicator because you have to collect the data so you have somewhere in
     the neighborhood of 18-24 months that you are behind as far as the data collection
     that you have and as far as what you are going to get. Mr. Anderson further noted
     that it is not a very reactive system, if Medicare or some other system comes in and
     charges are needed down the road. Mr. Anderson informed the Board that they can
     also develop a
     cost-plus system such as that in place in Rhode Island and Oregon.
     Mr. Anderson stated the problem with this type of system lies with hospitals having
     to file a Cost Report and copies of financial statements, along with Medicare cost
     reports and that the Board would have to go through a process




                                       Minutes of Board of Director’s March 25, 2008 Business Meeting
                                             17


                         NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     INGENIX POWER POINT PRESENTATION


                            POSSIBLE APPROACHES CONT’D
                       FACILITY WORKERS’ COMPENSATION
                                       APPROACHES
     of determining what a hospital’s cost is and then paying them some percentage of
     their costs. Mr. Anderson stated that when the Board determines what the cost is
     that you pay a percentage above the cost.
     Mr. Anderson noted Michigan just adopted a rule that involves straight costs and
     remarked the problem with cost-plus systems is Medicare’s RCC (rate to cost-charge)
     and stated the Board should be looking at the costs for all hospitals and not
     individual providers. Mr. Anderson provided directors with an example of a
     procedure such as anesthesia in which the costs are usually very low but the charges
     are fairly high. Mr. Anderson also advised directors that this type of system is also
     difficult because of implantable because there are often high mark-ups and hospitals
     typically do not mark up higher end items and that because of the such occurrences
     the Board would force hospitals to raise the prices on all of their implantable, which
     would result in them being higher than their facility RRCs which inspire and
     motivate increases for all implantables. Mr. Anderson noted that those in which the
     cost is less than the RCC for that cost is less than the facility-wide RCC it forces a
     price increase so that instead of keeping the costs down what actually ends up
     happening is the costs go up. Mr. Anderson noted there are a lot of implantables in
     the workers’ compensation environment and that it then


                                        Minutes of Board of Director’s March 25, 2008 Business Meeting
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                           NEW BUSINESS CONTINUED
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     INGENIX POWER POINT PRESENTATION


                             POSSIBLE APPROACHES CONT’D
                           FACILITY WORKERS’ COMPENSATION
                                     APPROACHES

     becomes a serious cost consideration for hospitals. Mr. Anderson stated the Board
     can also develop a base rate relative weight system, or a modified Medicare type
     system which is similar to the systems in place in Mississippi and Georgia, and the
     direction Montana will most likely go in. Mr. Anderson explained to directors that
     the problem with Medicare is that they do some things that make no sense in the
     workers’ compensation environment and that they have a lot of rules the Board
     would need to go through to get things done. Mr. Anderson explained that the
     advantage to doing this type of system is that you can let Medicare do most of the
     heavy lifting and would not create a staff resource issue. Mr. Anderson noted that
     establishing a base rate, outlier thresholds and implantable codes really requires some
     discussion as to where to get the numbers and stated there are some downsides in
     establishing this type of system. Mr. Anderson remarked that the establishment of a
     base rate, outlier thresholds and implantable policies will require some discussion
     also as to where you get the numbers. Mr. Anderson noted the Board can also adopt
     a straight Medicare system, which is what Texas has done and the system West
     Virginia is trying.
     Mr. Anderson noted a modified Medicare approach which seems to have the




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                            POSSIBLE APPROACHES CONT’D
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     most promise, and remarked there are a couple of positives to this approach. Mr.
     Anderson noted every hospital in the State of Maine knows how to deal with
     Medicare and pointed out that they may not like it but they know the system well
     and went on to say that the second advantage is that Medicare updates it’s system on
     an annual basis so that in terms of maintaining the system Medicare is doing all of
     the heavy work. Mr. Anderson explained that Medicare will perform all of the rate
     calculations and will provide a mechanism for equalizing charges and predictability,
     and that from an insurance perspective this is a good thing because what the Board
     really wants is to have some more predictability so that it can set rates appropriately.
     Mr. Anderson explained that it is when you all of a sudden have rates that are not
     weighed that it can cause problems. Mr. Anderson advised directors that businesses
     and insurers like predictability. Mr. Anderson further explained that there are some
     downsides to Medicare because it underpays, and provided Board members with
     some examples. Mr. Anderson noted that Medicare underfunds hospitals and that
     part of the reason the Board is having this discussion today and hired Ingenix is
     because they do underpay hospitals.




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                            POSSIBLE APPROACHES CONT’D
                         FACILITY WORKERS’ COMPENSATION
                                   APPROACHES

     Mr. Anderson informed the Board that there is an outlier methodology problem with
     this type of system because outlier cases are very expensive cases. Mr. Anderson
     noted there were $2 million in outlier cases in the data Ingenix reviewed and roughly
     a total $12 million which totaled about 18 cases and remarked that there were about
     a dozen cases that were over $160,000 in charges. Mr. Anderson advised directors it
     is a really big issue in Maine and it is one of the things the Board needs to be
     sensitive to as to how the Board is going to deal with outlier cases. Mr. Anderson
     explained to Board members that DRG (diagnostic related group) , a system developed
     by Yale University back in the 80’s, assigns a case a DRG based on the diagnostic
     codes that are present and procedure codes present, and whether the patient was
     discharged, or not. Mr. Anderson informed the Board that when a patient comes in
     they take a look at the diagnosis codes and that patient then gets assigned a DRG
     and it is at that point, once the patient is assigned to a diagnosis-related group, that
     there’s a State or Payer for that diagnosis related group. Mr. Anderson noted that in
     October of 2007 Medicare revamped its system to come up with something called
     MSDRG which stands for Medicare Severity DRG and they attempted to account for
     more because the differences in the severity




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     of its patients. Mr. Anderson noted that a base rate is a multiplier and is a dollar
     number that is picked, similar to a conversion factor and that Medicare’s base rate
     for 2007 was $4,874. Mr. Anderson explained that MSDRGs are a way of following
     services and noted there are 745 of them this year and that they are based on the
     primary secondary diagnosis so that in order to calculate the base level of a MSDRG
     payment the Board would need to take the relative weight and multiply it by the
     MSDRG payment to get the payment amount. Mr. Anderson advised the Board
     that Medicare then immediately takes a system that’s fairly simple and makes it
     extremely complicated which results in them wage indexing hospitals so that
     hospitals get assigned a rule and a different wage classifications, and then reaches a
     level after an adjustment is made based on wages. Mr. Anderson noted that most of
     the wage indexes may cost around the same number, or slightly under the national
     median but that most of the hospitals in Maine are fairly similar as far as wage index
     is concerned. Mr. Anderson provided directors with a breakdown of a DRG, as seen
     on page 22 of Ingenix’s report and explained there are some variables taken into
     account by Medicare such as if one has low-income people in the market area they
     give some additional money




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     for that, as well as a medical education program, and for capital improvements. Mr.
     Anderson stated that effectively what you wind up with is a specific amount that
     Medicare will pay for a specific DRG.
     Mr. Anderson noted informed directors that Medicare typically pays about 40% of
     the charge. Mr. Anderson then explained that outlier amounts are not included in
     the Medicare calculation because they are normally one-time events, and that
     Medicare also makes some adjustments to cost reports, and remarked that outliers
     are based on charges. Mr. Anderson informed the Board that Medicare bases it on
     estimated costs and pays based on that which you only get after you get the trigger
     threshold so that what you basically get is whatever the DRG payment is. Mr.
     Anderson explained that it would be a separate provider number, if not billed under
     the hospital provider number and that if they are freestanding that they then would
     be considered a separate outlier. Mr. Anderson explained to Board members that the
     question then becomes are they filing a separate cost report and remarked that it’s
     harder to get to an outlier on an outpatient environment than it is for an inpatient
     environment. Mr. Anderson stated that it is also worthwhile to know what it is for
     critical-access hospitals which are smaller, rural hospitals that




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                             POSSIBLE APPROACHES CONT’D
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                                   APPROACHES

     represent a very small number of workers’ compensation cases, resulting in the
     impact being very small. Mr. Anderson explained that a core Medical issue for
     hospitals is underpayment and noted that Pennsylvania has a fairly-extensive Cost-
     containment Council as part of its State agency and that it discovered that in 2005
     that Medicare underpaid Pennsylvania’s hospitals by approximately 16% and that, at
     the request of Blue Cross/Blue Shield and Washington State, that Milliman did a
     similar kind of study and discovered that Medicare in Washington also underpaid
     their State’s hospitals by about 15% so that number seems to show up fairly
     consistently because the number is similar in a couple of other states. Mr. Anderson
     explained that the impact of that it is that realistically it is a hidden tax because
     hospitals then have to raise their charges to cover that 15% they are not getting from
     Medicare, and that it also results in an increase in health insurance premiums. Mr.
     Anderson noted the Milliman study also found that the data showed that commercial
     payers were paying roughly 50% more than what they are supposed to be paying and
     that anecdotally proved similar kinds of numbers.




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                                QUESTONS TO BE ANSWERED

     Mr. Anderson stated the Board needs to ask what are the needs for such a system;
     how should it be implemented and what are the longer-term implications of such a
     system. Mr. Anderson stated in doing so the Board should look at the existing
     environment and explained that Ingenix looked at the Maine Health Data
     Organization (an organization that collects data on hospital inpatient and outpatient charges)
     which supplied details on 658 inpatient admissions and summary details on every
     other admission that happened in Maine for 2006. Mr. Anderson explained that for
     outpatient services their data was showed it to be about 147,000 services and noted
     they did not have it broken down by claims but that what his Company has seen in
     other places it is about 30,000 claims. Mr. Anderson noted Ingenix also collects a
     large amount of hospital data and remarked that other states have inpatient data on a
     summary basis, and commented that Pennsylvania is one of them.
     Mr. Anderson apprised directors that approximately 500 of those represent workers’
     compensation claims and that Medicare’s 100% file which is every claim for every
     inpatient service, and outpatient claim filed by a hospital for Medicare which his
     Company looked at, as well. Mr. Anderson explained that for the inpatient overall
     observations it showed that out of the 658 claims it represents approximately $12.6
     million in total charges and based on Maine’s current formula that it represents about
     $12 million in paid amounts




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                              QUESTONS TO BE ANSWERED

     and remarked that the Health Data Organization does not have reimbursement data
     and what they do have is fairly unreliable. Mr. Anderson explained to Board
     members that there is also a difficulty in the commercial environment because when
     you are comparing that the Maine Health Data Organization is using DRGS but
     commercial payers may be paying under a different form such as per diems, or flat
     amounts and that it makes it difficult to do a side-by-side comparison. Mr. Anderson
     explained that back, hip and joint replacements were the top 10 admissions; with the
     exception of rehabilitation cases and that those top 10 DRGs represent about 50% of
     the charges and 30% of the admissions, or half the charges. Mr. Anderson
     remarked that there were 18 DRGs that represent 30 admissions that had average
     charges in excess of $50,000 and commented that data was not available to convert it
     over. Mr. Anderson noted Ingenix then looked at the case mix index for workers’
     compensation cases which is a way of saying how severely-ill are the workers’
     compensation patients v. how severely ill are other patients and that what Ingenix
     discovered is the case mix index for workers’ compensation is 4.2 days and that the
     average length of stay for patients in the same DRG was 6.7 days. Mr. Anderson
     explained that it is close and that workers’ compensation is slightly more-severe than
     the average patient but not significantly more severe and that part of the reason is
     because




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                              QUESTONS TO BE ANSWERED

     workers’ compensation cases tend to have either outlier cases, or have more severity.
     Mr. Anderson further explained to Board members that you see more things in
     workers’ compensation cases than in the normal environment such as joint and hip
     replacements which are normally seen in patients over the age of 60. Mr. Anderson
     stated that in most cases patients are in and out of the hospital fairly quickly and that
     part of the reason is because the patient is healthy enough to have a job. Mr.
     Anderson noted that in talking about outliers, charge variances and implantables that
     outlier cases are the major issue in Maine and actually are seen in every state. Mr.
     Anderson noted there were 12 cases that totaled almost $2 million in charge or over
     $166,000 and those 20 cases had an average charge above $70,000 which is about
     where Medicare’s outlier kicks in. Mr. Anderson noted 20 cases represent a fairly
     substantial amount of money as a cost to the system and that one of the things that
     Ingenix looked at is the charge variance amongst the hospitals to see what kinds of
     charges can be seen. Mr. Anderson gave an example of DRG 45, a hip replacement,
     and compared that for six different hospitals.
     Mr. Anderson, referring to the chart on page 29 of Ingenix’s report, shows the
     average cost for non-workers’ compensation patients (left-hand column) and the
     average cost for workers’ compensation patients for the same hospitals (right-hand
     column) and noted there were some variances for the charges for




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                               QUESTONS TO BE ANSWERED

     workers’ compensation patients and non-workers’ compensation patients. Mr.
     Anderson noted some will be driven by implantables and explained that in the
     Medicare environment a surgeon will also select something that is age appropriate so
     that if you are 70 years old and having a hip replacement they only need a hip that
     will last 15 or 20 years so a decision may be made to use a stainless steel replacement
     but that if a patient is only 30 years old they will use a titanium hip replacement
     which is more expensive, and noted it is probably driving some of the charge
     differences seen. Mr. Anderson noted that whatever mechanism the Board comes up
     with it wants to make sure a surgeon is not using the cheapest implantable because
     that may not always save money over the long haul. Mr. Anderson noted that
     Medicare basically says use the cheapest implant because that is all they will pay for
     and stated the Board may want to differ in that manner. Mr. Anderson stated some
     of the issues that come up is how do we talk about inpatient comparisons and noted
     there are some real difficulties. Mr. Anderson explained that for one thing a
     database that shows what the commercial payers are paying is difficult to come by
     because hospitals do not want to release the data because they do not want to
     relinquish what the discounts are and that insurers do not want to do it because they
     do not want a change in the marketplace. Mr. Anderson noted that for that reason it
     is a difficult issue and noted the second thing is




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                              QUESTONS TO BE ANSWERED

     that there is a widespread belief that a commercial environment is the same as the
     workers’ compensation environment, and remarked that is not always the case. Mr.
     Anderson advised Board members that in workers’ compensation you will see
     trauma kinds of injuries and that in the commercial environment the reason that
     most people are admitted to the hospital is births, heart disease and cancer. Mr.
     Anderson noted that he only saw one birth in the workers’ compensation data. Mr.
     Anderson, referring to page 31 of Ingenix’s report, noted that for DRG 441, a hand
     injury code, that for 25% of all cases done in Maine in 2006 they were workers’
     compensation cases and that for commercial payers they did not pay a lot on those
     types of cases.
     Mr. Anderson stated that in this particular DRG workers’ compensation is the big
     player. Mr. Anderson stated that for payment comparison purposes Ingenix looked
     at the median for 2008 Maine Medicare and noted that the base rate is $5,936 and
     that Ingenix does not know what the Medicare environment is and what types of
     outliers are relative but that they do know that about 12 cases would qualify for
     Medicare outlier payments in the Medicare environment, and remarked that it raises
     the Medicare estimate to about $6,900 and that if you assume hospitals are getting
     reimbursed at 95% of their charges. Mr. Anderson noted for every hospital you can
     look at the cost reports for that information, and remarked that the median
     deductible




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                               QUESTONS TO BE ANSWERED

     ratio in Maine is about 40% and if the hospital is expecting to collect 60% on the
     dollar and that if it is calculated that way one could say that the base rate is around
     $7,996, assuming it is based on a deductible ratio. Mr. Anderson explained that the
     deductible ratio is for all payers, including Medicare.
     Mr. Anderson also advised directors that there are three components that become
     important, two of which are most important – base rate and outlier trigger point and
     outlier payment, and how to fund the outlier. Mr. Anderson stated the cost to people
     in the State of Maine is the sum of routine payments plus the same of outlier
     payments, and referred directors to page 34 of Ingenix’s report wherein his Company
     provides the Board with a comparison of inpatient base rates. Mr. Anderson
     explained that it shows the range and how you set base rates. Mr. Anderson noted
     the 12.7 figure includes everything but that there is no estimate and no outliers and it
     is revenue neutral.
                             ONE POSSIBLE APPROACH
     Mr. Anderson, referring to page 35 of Ingenix’s report, stated that if the Board selects
     a base rate of 175% to national Medicare rate ($8,687) that it leaves approximately $3
     million as a set-aside for outlier cases and that for 2006 it was $2 million in outliers,
     which leaves about $1 million for an implantable add-on so that if one has an
     expensive implantable one can have money to




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                                 ONE POSSIBLE APPROACH’
                                       CONTINUED

     fund for them. Mr. Andesron explained that one advantage to selecting the national
     Medicare rate for rate-setting is that it’s a well-published amount and the Board
     would not need to redraft it every year. Mr. Anderson stated it is a better system to
     maintain, as well. Mr. Anderson noted the topic for the Board is to talk to hospitals
     and insurers to see if they would rather have a higher base rate and less money for
     implantables and outliers, or would they rather have more money for outliers and
     implantables, and less money for patients. Mr. Anderson noted different people have
     different perspectives and remarked that it is a good starting point for the Board
     because it is in the realm of what everyone else is doing and it still saves the Board
     money as far as having an implantable policy. Mr. Anderson noted it is also a stop-
     loss for hospitals.
                                   OUTPATIENT SERVICES
     Mr. Anderson noted outpatient methodology can be confusing but relatively
     straightforward. Mr. Anderson advised directors that Medicare uses three methods
     for paying for hospital outpatient services such an APC (an ambulatory payment
     classification system which functions similarly to the MSDRG but are not quite the same); fee
     schedule for labs, DME and cost or by report basis so the hospital will submit a cost
     provider report to determine what the




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                                  OUTPATIENT SERVICES

     a payment needs to be. Mr. Anderson remarked that the difference on an outpatient
     basis v. an inpatient basis is the diagnosis codes do not really matter on an outpatient
     basis. Mr. Anderson noted a chest x-ray is a
     chest x-ray but that on an inpatient basis the diagnosis code matters and on an
     outpatient basis it is a transaction. Mr. Anderson explained that what Medicare does
     is create a relative weight for every APC, then multiply it by the base rate to equal
     the payment and remarked that the current base rate this year is $63.70 and that the
     wage index 60% of the payment, as opposed to 57% on an inpatient basis. Mr.
     Anderson noted that by law when they calculate out the relative weights it is based
     on what the cost to the hospitals are to perform the procedure and that by law,
     within an APC bundle, no item can be more than twice its expense in terms of
     hospital cost as any other item within that bundle and remarked that Medicare also
     provides a discount of 50% on certain kinds of procedure codes and gave an example
     of paying for a procedure one time, even if the patient receives some of the services
     twice and will refer to what is called T status codes, some of which are paid at 100%
     and others at 50%. Mr. Anderson noted that if there is no CPT code they do not
     make a payment and this has some implications when you look at the Health Data
     Organization data because commercial payers do not need to follow those rules so
     you may see a regular code applied, and commented that if




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                                 OUTPATIENT SERVICES
                                     CONTINUED

     there is no charge it would not have a CPT code so for the sake of analysis what
     Ingenix did was if there were a charge and they knew what the amount was that was
     paid there we kept the dollars there, even if they did not know what they were
     attributed to in an individual line for a claim. Mr. Anderson noted the analysis
     includes everything and that the Health Data Organization represented about $25.4
     million in charges--encompassing 147,411 services provided. Mr. Anderson stated it
     is the technical component because some hospitals were billing both the professional
     and technical components and this it is the technical component only and does not
     include physician payments. Mr. Anderson noted that based on the current formula,
     Ingenix is estimating the payment would be $24.1 million and that out of the
     universe there are about 13,000 CPT codes and that Ingenix saw a little more than
     1,000 which is typical in a workers’ compensation environment because many of
     them are not seem in a workers’ compensation environment. And, as you might
     expect, that based on volume, physical therapy codes were the largest and that 21 out
     of those 1,035 cases had average charges higher than $5,000 and conversely, 285
     codes had average charges less than $100 and remarked that it is fairly easy to get
     there if you have procedures you can use on an outpatient basis that actually will
     have some substantial kinds of charges.




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                                      CONTINUED

     Mr. Anderson noted that the average charge for workers’ compensation that it was
     $172 and that the average charge for non-workers’ compensation costs was $129 but
     then when Ingenix went back and looked at utilization the difference is only about $7
     so a lot of the difference in charges is being driven by utilization on an outpatient
     basis. Mr. Anderson explained to Board members that there are different things
     happening in the workers’ compensation environment. Mr. Anderson also explained
     to members of the Board that Medicare assigns a status indicator to a CPT code and
     that indicates what the payment methodology is that Medicare follows as far as how
     they are going to do it and it provides a convenient way to look at things as far as
     costs and number of categories of codes. Mr. Anderson, referring to page 40 of
     Ingenix’s report, noted the chart describes the percentage of charges and the
     percentage of volume for fee schedule, procedures, emergency and medical ,
     ancillary, packaged non-paid separately and miscellaneous. Mr. Anderson noted
     that in terms of looking at the whole pie about 26% of the charges seen represent
     51% of the volume and explained that is why most entities are using outpatient
     service for therapy-types of things. Mr. Anderson also explained that procedures
     represent 40% but only 10% of volume and those emergency and medical codes
     about 15% of total




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                                      CONTINUED

     charges and about 18% of the total volume, which packaged codes 3.2% of charge
     and 1.5% of volume and that for miscellaneous items it was 5.1% of charge and 7.8%
     of volume. Mr. Anderson, referring to pages 41 and 42 of the Ingenix’s report, noted
     the breakdown is by codes, based on total charges and total services and that AFCs
     (ambulatory facility charges) should have been cheaper costs because they do not have
     the overhead costs. Mr. Anderson noted certain codes are considered packaged
     codes and that others are considered to have their cost included in the cost of the
     primary procedures and noted that Medicare also applies another discount to another
     set of codes which are T status codes and that if two T codes are present that the
     lower weight code is paid at 50%. Medicare has a goal of having everyone on the
     same platform. Mr. Anderson, referring to page 46 of the report, explained ASCs
     (ambulatory surgical charges) to the Board with respect to Medicare’s proposal and
     noted ASCs would be covered by APC rules and methodology, that the base rate
     would be 65% of the hospital base rate, and that ASC’s would be allowed to perform
     any and all services currently allowed in an outpatient setting. Mr. Anderson noted
     he discussed this issue with staff and noted it is not a significant amount of money
     and advised the Board that Medicare publishes a quarterly update for those and
     maintains a system policy and pays them a percentage of the charge. Also, in
     response to an




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     inquiry as to whether Medicare is underpaying AFCs below cost
     Mr. Anderson stated that is the case and that for hospitals the situation is even worse
     because Medicare excludes capital costs so they immediately start off 7% under so
     that probably when you are looking at hospital outpatient you are probably looking
     at instead of paying 15% you are probably looking at 20 or 25% underfunding. Mr.
     Anderson noted that for freestanding AFCs there is a lot of debate about that and it
     has been a topical kind of debate for the last six months as to what is the appropriate
     amount to pay AFC’s.
     Mr. Anderson stated that all of the fee schedule items if you are trying to do cost
     containment it does not represent a large area, will save the Board a lot of money or
     is a huge issue administratively. Mr. Anderson explained that for applying
     Medicare’s rules for surgical procedures and other kinds of things.
     Mr. Anderson noted that one of the things that Ingenix struggled with over the last
     six months and something that has been an issue is what is rationale, what is sane
     and what numbers do we need to make this all work. Mr. Anderson noted that one
     of the suggestions he has made to staff is to implement some sort of a rule in which
     you can ask entitles what is in the data to at least see what the discount rates are so
     that the Board can make sure it is doing things fairly by not overpaying or
     underpaying, and the best way to do that is to ask providers for data at an aggregate
     level to see what is




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INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     INGENIX POWER POINT PRESENTATION

                                   OUTPATIENT SERVICES
                                       CONTINUED

     actually going on so the Board is making rationale decisions about it.
     Mr. Anderson noted one suggestion was to look at this type of a rule and referred the
     Board to page 46 of Ingenix’s report. Mr. Anderson stated the Board may want to
     ask for the last fiscal statement to see on an annual basis whether the base rate is
     working out, where they need to be and whether the implantable prices are where
     they need to be. Mr. Anderson noted there are two issues that are involved here – 1)
     adopting a methodology and putting it into play and saying we are going to start this
     on January 1st but what we really need to do is go back and address the amounts of
     money involved (base rates, outliers, etc.) so that staff can look at it in a year and say
     the base rates are too high, too low, we’re spending too much on outliers and maybe
     we need to talk about that, or do we need to do some more workplace safety kinds of
     things, etc. Mr. Anderson noted that at least that way there is a basis for making a
     rationale decision and remarked that if he were a hospital they would want you to
     have it as long as it could be confidential and remarked that some of the information
     is already coming out of cost reports and can be determined. It is important to have
     it to make sure entities are not getting underpaid and whether the system is a good
     one, or not. Mr. Anderson noted a discussion between hospitals, AFCs and the
     Board would be beneficial to see what data makes the most amount of sense to
     collect and what is the




                                        Minutes of Board of Director’s March 25, 2008 Business Meeting
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                         NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     INGENIX POWER POINT PRESENTATION

                                   OUTPATIENT SERVICES
                                       CONTINUED

     easiest to do, and what is the least difficult to do. Mr. Anderson explained that if
     you do not have it that it then becomes a maintenance type of issue to be able to
     recalibrate the system year after year. Mr. Anderson noted Medicare requires
     hospitals to file cost reports at the end of a fiscal year so that they can continually
     recalibrate their system, and noted the Board needs to build in some sort of a
     mechanism to recalibrate the system as it moves forward and it can’t be a huge
     involvement because otherwise you will need more staff to manage it. Mr. Anderson
     noted there are also large disparities amongst the different hospitals and also within
     their departments. Mr. Anderson then summarized the impact of such a system on
     hospitals which would result in a shift of money from surgical to medical and or
     trauma admissions and noted that medical and trauma DRGs are getting underpaid
     as compared to surgical codes. Mr. Anderson noted that on an outpatient basis most
     likely a higher payment will result for emergency codes and will get paid somewhat
     better than they what they have been before and probably a shift away from some
     surgical types of codes and that for fee schedule items it is effectively the same policy
     so probably no significant difference there one way, or another. Mr. Anderson stated
     the implication for payments is more predictability in payments and noted Ingenix
     saw all sorts of charge variances across the board and how do you set your rates
     because




                                        Minutes of Board of Director’s March 25, 2008 Business Meeting
                                            38


                        NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     INGENIX POWER POINT PRESENTATION

                                  OUTPATIENT SERVICES
                                      CONTINUED

     rate setting becomes a function of which kind of injury at which hospital.
     Predictability in the insurance market is a good thing because you can start making
     sound decisions on rates. Mr. Anderson noted it also will result in some level of
     complexity in claims process for inpatient as MSDRG will have to be assigned and
     that it provides for better estimates of future hospital cost increases. Mr. Anderson
     advised directors that Montana has a lot of small self-insureds and TPA’s and that
     his Company will go to the Montana website which will allow a TPA to key in the
     diagnosis and procedure codes which will tell them the MSDRG assignment and pay
     them the amount. There will be no question about the assignment. Mr. Anderson
     noted that for AFCs it is difficult to determine what will happen but that it will
     probably result in some cost shifting and puts them on more of an equal footing so
     they can compete with hospitals and will add some complexity to ASC billing and
     payment transactions. Mr. Anderson noted AFCs by their nature have a typical
     understanding of rules and really do not have a high level of support staff that
     understands all of the rules so there will be some educational issues involved in
     implementing for AFCs and training issues. Mr. Anderson noted that typically
     AFCs he has spoken to only have one or two people to do their billing and some may
     have some real issues. Mr. Anderson recommended the Board offer some training
     classes and seminars to explain a system so there is clarity and people understand
     really what is going on.



                                       Minutes of Board of Director’s March 25, 2008 Business Meeting
                                           39


                        NEW BUSINESS CONTINUED
INGENIX REPORT ON WORKERS’ COMPENSATION INPATIENT, OUTPATIENT AND
AMBULATORY CARE FACILITY CHARGES IN MAINE CONT’D

     CLOSING COMMENTS

     Chairman Dionne thanked Mr. Anderson for his time and stated Ingenix will be working
     with the Board during this process and remarked that Mr. Anderson will be available by
     phone and electronically, as needed. Deputy Director Inman stated she is
     recommending the Board send the matter to the Consensus-Based Rulemaking
     Committee to get an idea of what the methodology and base rate should be, to discuss
     implantables and outliers, to address their concerns and to draft a rule for the Board
     to work with. Ms. Inman stated she is expecting to schedule two meetings with the
     group and that following the Committee’s meetings she will return to the Board with a
     report and draft rule for its consideration. Mr. Dionne stated the stakeholders are an
     integral part of the process and noted staff is hoping the Committee will reach a
     consensus opinion but that if it does not that they will be providing the Board with a
     recommendation. Director Monfiletto suggested the Committee also discuss self-
     insureds and carriers themselves entering into a contract with Maine’s hospitals and
     facilities. In response, Mr. Anderson noted they do not have enough volume to do any
     rate negotiations, noting that is also the case for Maine’s smaller employers.


     Gary Koocher MOVED TO SEND THE INGENIX REPORT TO THE
     CONSUSENSUS-BASED RULEMAKING COMMITTEE FOR THEIR REVIEW AND
     DISCUSSION; Joan Kirkpatrick seconded. MOTION PASSES 6-0.

     Discussion:
     Directors and Staff briefly discussed staff inviting the stakeholders to today’s
     presentation to receive the report at the same time as the Board members.

                               ADJOURNMENT

     Gary Koocher MOVED TO ADJOURN TODAY’S MEETING; Joan Kirkpatrick
     seconded. MOTION PASSES 6-0.

Chairman Dionne formally adjourned the meeting at 11:41 a.m.


                                      Minutes of Board of Director’s March 25, 2008 Business Meeting

								
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