To our valued clients –

Since 1975 Medata, Inc. has pioneered the development and application of technologies that have lead the way in workers’ compensation medical bill review. With all of the recent discussion of Massachusetts’ Appellate Court decision and the New York State Ruling regarding Usual, Customary and Reasonableness Payment methodologies, we believe that it is essential that our clients know how this affects their business, what implication this court ruling has for them, and to provide answers to how Medata’s products and services differ.

In a settlement with one of the nation’s biggest insurers, New York’s attorney general, Andrew M. Cuomo, has ordered an overhaul of one common database that the industry uses to determine how much of a medical bill is paid when a patient uses an out-of-network doctor.

“ATTORNEY GENERAL CUOMO ANNOUNCES HISTORIC NATIONWIDE HEALTH INSURANCE REFORM; ENDS PRACTICE OF MANIPULATING RATES TO OVERCHARGE PATIENTS BY HUNDREDS OF MILLIONS OF DOLLARS.”

According to Mr. Cuomo, the database consistently understated the local “reasonable and customary” rates, which is collected from insurers. The report of the investigation’s findings described the industry calculations as “created in a well of conflicts” that produced information that was “unreliable, inadequate and wrong.”

Attorney General Cuomo’s investigation concerned allegations that the largest health insurers in the country rely on a common database to determine their “usual and customary” rates. This database uses the insurers’ billing information to calculate “usual and customary” rates for individual claims by assessing how much the same, or similar, medical services would typically cost, generally taking into account the type of service and geographical location. Under this system, insurers control reimbursement rates that are supposed to fairly reflect the market.

To summarize the ruling in layman’s terms, of the recent court hearings, it was established that the sole issue at trial was whether the “amounts charged by the provider for his services were reasonable”.

Medata does not now or has ever used the database referenced in these allegations and lawsuits. Through 20 years of investment, research, and dedication Medata, Inc. developed TALLY, the largest workers’ compensation medical bill database in the country. Medata currently has greater than 700 million individual medical charges from just the last ten years. Medata uses TALLY to support our bill review application through statistical compilation of the data to produce “reasonable” payment levels for medical procedures and defensible edits for reviewing medical charges.

The statistical analysis applied to the database yields values and prices for medical procedures not covered by state fee schedules. It also provides a significant number of “defensible” edits such as the “Rarity edit” which are not available to other bill review applications.

TALLY is derived from actual provider charges for a specific service or procedure code. Medata compiles specific billing information that includes the claim number of the patient, the provider’s Tax-ID, provider’s name, provider’s address, date of service, procedure code and modifier, provider’s charge and provider type. Medata then sorts the billing information according to the five categories:

1) Year of service;

(2) PSRO area (except where noted)

(3) Procedure code and modifier

(4) State where the service is rendered

(5) Provider Type

Only in those instances where a specific provider has submitted a specific charge, for a specific procedure, rendered on a specific date of service, for a specific claimant, do we collect the charge information for inclusion within the TALLY database.

The geographic schema utilized in most states by the Medata TALLY database is based upon the schema developed by the Professional Services Review Organization (PSRO) for the federal government (including the District of Columbia, Puerto Rico, and the US Virgin Islands). The PSRO was established by the federal government to define socio-demographic areas for the review of Medicare billings submitted for Medicare claims. We at Medata opted to adopt the PSRO areas specifically because they were developed in part by addressing the issue of basing a geographic region upon the cost of operating a practice and rendering services. Medata does not alter the PSRO areas as they are defined by the federal government. The PSRO area schema is not utilized in the State of Texas where an alternative geographic schema exists. Additionally, the New York Workers’ Compensation, New York No-Fault, New Jersey No-Fault, and Virginia Workers’ Compensation review environments utilize a state-mandated, legislatively defined geographic schema, for compliance reasons.

On an annual basis, we gather provider charges to update our TALLY study. We also update our TALLY study on a semi-annual basis in the Wisconsin and Indiana workers’ compensation review environments for compliance reasons. Each TALLY study is created from the actual provider charges using algorithms that identify provider charge percentiles for like provider types (for example: Medical Doctor, Chiropractor, Physical Therapist, and the like) rendering the same service in the same geographic area in the same time frame.

Furthermore, each Medata customer defines the review percentile in TALLY that meets its bill review philosophy. Each TALLY study is stored independently from another. This valuable methodology grants us the ability to assess whether a charge submitted today for an older date of service is reasonable using TALLY results applicable to the older date of service. For example, today we can review a charge for a service rendered in 1992 using the 1992 TALLY database to determine reasonableness.

The algorithms we use to calculate each charge percentile guarantee that each derived reasonable value is statistically accurate to at least a 95 percentile level of confidence. Medata’s algorithms and compilation processes have been repeatedly reviewed by the academic community and consistently substantiated. Howard G. Tucker, PhD Professor of Mathematics, University of CA at Irvine, has verified the statistical accuracy of the algorithms for over 20 years.

For further information, please contact Medata at \n This e-mail address is being protected from spambots. You need JavaScript enabled to view it This e-mail address is being protected from spambots. You need JavaScript enabled to view it

You can read the entire ruling at the following website:

http://www.oag.state.ny.us/media_center/2009/jan/jan13a_09.html