California Legislator Wants Audit of Hospital Chain's Comp Related Charges

California State Senator Richard Alarcon (D-Los Angeles) is calling for a formal state audit of Tenet Healthcare Corp.'s billing practices and how they affect the workers' compensation system in California.

Alarcon announced his plan at the conclusion of a hearing Wednesday by the Senate Committee on Labor and Industrial Relations, which he chairs, the first formal legislative hearing in the nation on the growing scandal involving Tenet.

The Senate hearing was prompted by charges by the California Nurses Association and the Institute for Health and Socio-Economic Policy (IHSP), which works with CNA, that Tenet's median gross charges to employers on workers' compensation claims for employees needing hospitalization are double the charge rate of other California hospitals. Alarcon asked the IHSP to assist with the audit.

"Sen. Alarcon's plan to audit Tenet is a welcome step forward in our common goal of improving the quality of care for California workers and reducing health care costs for consumers which is reducing access to care as financially pressed businesses cut health benefits," commented CNA President Kay McVay, RN, after the hearing.

In response to sharp questioning by Alarcon and other committee members, Gustavo Valdespino, senior vice president for operations for the hospital chain, agreed to provide the committee with a plan within a week to show how Tenet would reduce its worker's compensation charges. Alarcon welcomed that offer, but said he would proceed with his intent to pursue an audit and new legislation intended to assure a "better way to set (workers' compensation) rates quicker and a better way to monitor the system" to guard against fraud and abuse.

Asked by Alarcon why they were cutting charges if their past practices were proper, Valdespino responded, "that strategy was not sustainable in the future." Tenet is currently facing multiple state and federal investigations.

Alarcon and other legislators chastised Tenet, and cited numerous complaints they receive from employers about the high cost of workers' compensation that encourages businesses to reduce health benefits for California workers.

"There's a general perception that you (Tenet) gouged the workers' compensation system," said Alarcon. "To the extent that the system is being gamed, it unfairly diminishes the quality of life in California."

"Please don't make your profits on the backs of our injured workers," added Sen. Liz Figueroa (D-Fremont).

IHSP Director Don DeMoro said a critical challenge is to determine a hospital's actual costs for providing medical care, not the "imputed" cost, which becomes a basis for determining the ultimate reimbursement, whether for a workers' compensation claim or from Medicare.

Tenet's gross charges, which according to research by CNA and IHSP, are double and triple many other hospitals in median workers' compensation claims, Medicare outlier payments and drug charges, are a significant concern, DeMoro said, since the gross charges are part of the equation for calculating the costs that are integral to its reimbursements. "The higher the gross charge billed by a hospital, the higher the imputed cost, which tends to contribute to higher costs for the workers' compensation system," asserted DeMoro.

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