Every healthcare provider asks the same fundamental question in a personal injury case: What is a reasonable charge for the care I provide?

The answer has never been simple.

Insurance companies have one opinion. Medicare has another. Workers’ compensation has another. Cash-pay patients pay something different. Out-of-network reimbursement is different still.

Hospital charges differ from ambulatory surgery centers. A rural physician’s overhead differs from a large metropolitan practice. A board-certified spine surgeon has different costs than a family practitioner.

Healthcare pricing has never been one-size-fits-all.

Yet SB 623 attempts to establish a common benchmark for recoverable medical expenses in covered rideshare cases by using the 70th percentile of FAIR Health billed charges or a comparable recognized database.

For some, that may sound perfectly reasonable.

For others, it raises a far more important question: Who should determine what healthcare is worth?

That is the discussion providers should be having.

First, What Is FAIR Health?

FAIR Health is presumed to be an independent, nonprofit organization. What is a fact is that it maintains one of the nation’s largest healthcare claims databases.

FAIR Health originated from the settlement of a class action lawsuit against an insurer. As part of the settlement, the insurer was required to create this aggregator site.

So yes, you could say an insurance originated, created, and funded site that benefits from lower medical care reimbursement now sets the standard for medical charges in California (at least) for rideshare cases (at least).

Using billions of commercial insurance claims, FAIR Health publishes charge benchmarks based on geographic regions, procedure codes, and other variables using algorithms FAIR Health controls and has the ability to manipulate.

Its data has been used by insurers, courts, employers, researchers, and policymakers for many years.

There is free access to the public, as part of the class action settlement. There is also paid access which many insurers, third party claims administrators, companies, medical billing experts and billing specialists subscribe to and use.

That is important to understand. FAIR Health is not a new organization created for SB 623.

Nor is it inherently “good” or “bad.” It is simply a database.

Like any database, however, its usefulness depends on how accurate that database is, how it is applied and how that database is overseen, controlled, managed and accessed.

Why the 70th Percentile?

SB 623 selects the 70th percentile as the benchmark for recoverable medical expense damages in covered cases.

FAIR Health’s viewable percentiles include the 50th, 60th, 70th, 80th, and 90th.

Immediately, reasonable questions arise.

Why not the 50th percentile? Why not the 80th? Why not the 90th?

Why not allow courts to evaluate reasonableness based upon the facts of each individual case?

The legislation answers the question by making a policy choice.

Whether that policy choice proves appropriate over time remains to be seen.

But providers should recognize something important.

The debate is no longer simply about what providers charge. It is becoming a discussion about who gets to define “reasonableness.”

Reasonable for Whom?

This is where healthcare providers, physicians, and facilities often become frustrated.

A “reasonable” charge depends upon perspective.

From the patient’s perspective… Reasonable means obtaining timely, high-quality care.

From an insurance company’s perspective… Reasonable often means controlling costs.

From a healthcare provider’s perspective… Reasonable means covering overhead, investing in technology, paying employees, assuming professional liability, and remaining financially healthy enough to continue serving patients.

Those perspectives are not identical. Nor should we expect them to be.

Healthcare is both a profession and a business. Ignoring either reality creates problems.

Does One Benchmark Fit Every Specialty?

Consider the following providers:

• Chiropractor
• Physical Therapist
• Pain Management Physician
• Orthopedic Surgeon
• Neurosurgeon
• Diagnostic Imaging Center
• Ambulatory Surgery Center
• Neuropsychologist

Each specialty operates under dramatically different economic realities.

Some require little capital investment.

Others require millions of dollars in equipment, operating rooms, implants, imaging technology, anesthesia support, regulatory compliance, and highly specialized personnel.

Can one percentile adequately reflect every specialty?

Perhaps. Perhaps not.

That question deserves thoughtful examination rather than assumptions.

Healthcare is remarkably diverse. Benchmarking systems inevitably simplify that complexity.

The Difference Between Billing and Collecting

One of the most misunderstood aspects of healthcare economics is the difference between charges and payments.

Very few providers collect their full billed charges every time from everyone.

Government programs establish fee schedules. Workers’ compensation follows statutory reimbursement systems.

Commercial insurers negotiate. Cash patients negotiate. Attorneys negotiate. Physicians, healthcare providers and facilities negotiate.

Healthcare providers understand this reality better than anyone.

The issue, therefore, is not whether every provider always expects to collect every dollar billed.

The foundational issue is whether legislation should establish a statutory benchmark that becomes central to determining recoverable damages in litigation.

Those are two very different questions.

What Happens When Benchmarks Become Law?

Benchmarks serve many legitimate purposes.

They help compare markets. They provide objective reference points. They promote consistency.

But when a benchmark becomes embedded in statute, its role changes.

It is no longer merely informational. It becomes influential.

Healthcare providers should therefore ask several practical questions.

Will benchmark data remain current?

How frequently will it be updated?

Is it accurate and does it reflect rapidly changing healthcare costs and charges?

Does it adequately account for geographic variation?

Does it recognize unique specialties?

Does it consider providers assuming extraordinary financial risk through lien treatment?

Does the FAIR Health data available at the beginning of the calendar year apply to the entire year, or must everyone constantly monitor for changes in pricing data?

Will FAIR Health still allow a “free” access to comply with a legislative mandate?

Does FAIR Health now have exposure itself for those who later may assert their dataset is inaccurate, not up-to-date, or manipulated?

These questions are not criticisms of FAIR Health. They are questions about how any benchmark functions once incorporated into law and areas FAIR Health itself should be looking into.

There is also the practical effect of placing the decision on the reasonableness of charges with an entity originating from insurers who desire to lower reimbursements to profit more, and who have no oversight or controls.

Also, a medical billing expert who frequently testifies in court once told me that FAIR Health’s listed algorithmic results are intentionally lower for three main reasons. First, they incorporate Medicare rates which drops the numbers sizably. Second, while you enter a five-digit zip code, the system intakes the first three digits, which brings in poorer geographic areas that lower the numbers. Third, the site is not updated annually and often years pass without increases such as for cost-of-living adjustments.

Those aspects alone would lead to using the 80th or 90th percentile rather than the 70th.

Let’s recognize that California just thrust a burden onto FAIR Health. As more and more seek access to their listings, the cost to FAIR Health goes up. So does potential liability exposure involving its database display, control and management.

FAIR Health has historically against its data being used for personal injury case fee setting. I know, because I once received a cease-and-desist letter from FAIR Health when mentioning them as part of a fee-setting article I wrote which was published in a national provider publication.

Will access to FAIR Health continue to be free, even for California inquiries?

If you also try to look at and list the listings for specific codes from the free site, you will find there is a small limit to how many codes you can pull up at a time. So even trying to comply with this new law is going to take even more time, be quite frustrating, and the need to constantly monitor.

Is FAIR Health the proper determiner of “reasonableness”?

The Financial Risk Providers Already Accept

One aspect of this discussion is often overlooked.

Providers treating lien-based personal injury patients frequently assume risks that traditional healthcare reimbursement models do not require.

They may:

• Wait years for payment
• Advance expensive treatment without guarantees
• Absorb collection risk
• Invest substantial administrative time
• Participate in litigation
• Produce extensive documentation
• Respond to subpoenas and depositions

Those risks become part of the economics of personal injury medicine.

Some providers determine the risks are manageable. Others choose not to participate.

Both decisions are legitimate business judgments.

The question becomes whether benchmark reimbursement adequately recognizes those additional risks.

That discussion deserves thoughtful analysis.

The Potential for Unintended Consequences

Every public policy decision creates incentives and disincentives which influence behavior.

If providers conclude that statutory reimbursement limitations no longer justify the financial uncertainty associated with lien-based treatment, some may simply decide not to participate.

No law requires them to leave. No regulator orders them to stop treating patients.

Markets respond. Businesses adapt. Healthcare organizations evaluate risk.

That is how incentives and disincentives work.

The important policy question becomes: How many providers would have to change their behavior before patient access begins to change?

No one knows the answer today. But it is a question worth asking.

You Now Have a Ceiling Without a Floor Making Payment Negotiations Tougher

Don’t also get fooled by thinking you will receive even the 70th percentile of FAIR Health.

The new law specifically allows anyone to assert you deserve less, or nothing.

So now you have a ceiling on the most you can charge, which has already started the movement downward given you are starting at the 70th percentile and not at the 90^th percentile, and using a database that already keeps the numbers lower by how FAIR Health approaches the data and delivers the returns.

And you have no floor.

Law firms will now assert the usual percentage reductions to a bill that may have already started off lower because of the FAIR Health fee cap.

It’s wrong to begrudge law firms from seeking more money to put in their client’s pocket.

A medical office’s ability and skill in negotiating with law firms has now become elevated even higher.

Increasing your negotiating staff skills is no longer nice to have. It’s a must.

This Is Bigger Than FAIR Health

Ultimately, this discussion is not about FAIR Health per se. Nor is it about one percentile.

It is about something much larger: Who should determine the value of healthcare?

Should it be: The marketplace? The Legislature? Courts? Insurance companies? Healthcare providers, physicians, and facilities? Supposed “independent” databases? Or some combination of all of them?

Reasonable people can disagree.

But healthcare providers deserve a seat at that table. After all, they are the ones delivering care.

And no one should begrudge medical providers and physicians from profiting.

As I often say to the medical offices I coach, train and teach: “More Monday means More Mission.” The more money that ethical, competent healthcare providers make who do it right for their patients, the more they can help and the healthier and better off our communities, our country and our world become.

That’s a great thing.

A Better Conversation

Rather than framing this issue as providers versus insurers, or medicine versus law, perhaps the better discussion is how do we create a reimbursement system that is:

• Fair to patients
• Fair to providers
• Fair to defendants
• Fair to insurers
• Sustainable for the long-term
• Transparent
• Predictable
• And capable of preserving access to medically necessary care

That should be the goal. Because reimbursement is not simply about dollars.

It is about whether quality healthcare remains available to injured patients when they need it most.

Next in the Series

Why Are Doctors Signing Under Penalty of Perjury?

The New Referral Declaration Requirement and What Every Healthcare Provider Should Know. The next article explores one of the statute’s most unusual provisions: Healthcare providers may now be asked to sign declarations under penalty of perjury regarding attorney referrals, and if asked, it’s a mandate. Why was that requirement included? How should practices respond? What new burdens, costs and legal exposures have now shifted to healthcare practices? And perhaps most importantly… Are providers being asked to certify information they are not in the best position to know? Those questions deserve careful examination.