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BLOOMINGTON, MINN., September 1, 2011 — A recent Minnesota Supreme Court ruling that permits medical providers to continue marking up the cost of expensive implant hardware underscores the need to continue to pursue corrective action by the state Legislature to help contain medical costs, according to SFM officials.

The court ruled that an employer and its workers' compensation carrier must pay 85 percent of a hospital's usual and customary charge for spinal implant hardware even if those charges include a significant mark up.

In Ronald E. Troyer vs. Vertlu Management Co., Kok & Lundberg Funeral Homes and State Auto Insurance Company, the court looked only at whether hospital practice is consistent with state law. The ruling did not address the public policy implications of allowing significant mark-ups.

"Large hospitals are often marking up the cost of implants 200 to 400 percent more than the manufacturer's original price," said Scott Brener, SFM vice president and general counsel.

"Usual and customary charges essentially means hospitals can bill insurers whatever amount they want, and the insurer has to pay 85 percent of that," Brener said.

While the court said it was sympathetic to the arguments that the disparity between the amount HealthEast hospitals paid the manufacturer of the implant and the post-surgery price it charged Vertlu and State Auto Insurance is large—"maybe even unreasonably large"—the question of whether the price paid by Vertlu and State Auto Insurance was reasonable was not before the court.

Legislative action
One of the legal issues before the court was whether the manufacturer of the implant hardware should be required to charge directly for the hardware, but the court said the hospital may bill for the charges. The court also said the workers' compensation judge does not have the authority to determine a hardware price less than current law's 85 percent of usual and customary charges.

The debate, which has surfaced repeatedly in recent years in legislative discussions on containing workers' compensation healthcare costs, may heat up in advance of the 2012 legislative session.

"Minnesota should be more in line with what many other states are doing on this issue—paying an invoice-plus, with usually 10 to 35 percent over invoice," Brener said.

The Minnesota Department of Labor and Industry plans to brief the Workers' Compensation Advisory Council on the high court's ruling at its Sept. 14 meeting, according to department Communications Director James Honerman.

Read the Minnesota Supreme Court's findings in the case