The DWC has shown some willingness to modify the 2015 Copy Service Fee Schedule. One of the major items copy services want is to UN-BUNDLE the Release Of Information fees that copy services often have to pay in order to gain access to records. The term un-bundle here means to allow copy services to pass-through whatever fees they paid to an ROI company ON TOP OF the copy service’s regulated flat fee they are entitled to charge for their services (currently $180). Under the current Fee Schedule, copy services must pay all ROI fees as part of THEIR cost of doing business, and NOT pass those extra fees on to the Payer/Employer.
The goal of this article is to give Stakeholders some context to discuss the pros and cons of un-bundling these ROI fees.
The Bottom Line
To cut to the chase, my own opinion is that lobbying to have the ROI fees UN-BUNDLED is a BAD IDEA. It will likely cause the DWC to reduce the Flat Fee for copying by the average amount of ROI fees being paid historically (discussed below). That will mean either the same or LESS PROFIT for copy services built into their regulated fee. The same or less profit does not seem like a good use of lobbying efforts for the copy services. A better path might be to shoot for the highest Flat Fee possible in this round, and then lobby for some tools to enforce the current ROI regulations, including the right to block the use of ROI companies in the first place.
Definition of an ROI Fee
An ROI company is a “copy service” that is hired by the WITNESS (medical office, etc.) to produce records requested by case parties… as opposed to a traditional Professional Photocopier that is hired by a LAW FIRM or Adjuster on the case to go on site and copy medical and other types of records needed to manage the case. An ROI company works for the WITNESS, whereas a Professional Photocopier (aka Copy Service) works for the LAW FIRM or case party.
Historically in California, most of the copying of records has been done by Professional Photocopiers. More and more often though, ROI companies are appearing and interfering with the job of the Professional Photocopier. The witness pressures the Professional Photocopier to deal with the ROI company to get the records, rather than let the Professional Photocopier go on their premises to copy the requested records.
Current state of who pays for ROI
Under the current Copy Service Fee Schedule, the Professional Photocopier is entitled to a $180 flat fee to copy records, and that includes any ROI fees that might be required. This keeps the cost down to Employers, keeps the ROI fees somewhat regulated, but INCREASES the cost of providing records for the Professional Photocopiers. The Photocopiers want the ROI fees to be removed from the Flat Fee (un-bundled), and charged to the Employer/Payer as a separate and additional fee on the Photocopier’s invoice.
This means the Payer would be responsible for the Flat Rate for copying ($180), PLUS whatever ROI fees the copy service paid to get those records. This could significantly INFLATE the percentage of copy service invoices where ROI fees appeared.
How much are copy services paying in ROI fees now?
I’ve been asking around and am fairly confident that the average “all in” fees paid by copy services to obtain copies of records is between $25 and $30 per location. That’s dividing the total fees paid for records by the total number of ALL transactions in a period. Let’s call it $27, and this includes the $15 standard witness fee normally paid to a witness to release records. This is an AVERAGE, so there are some transactions that have NO ROI fees associated with them, many with just the standard $15 witness fee, and a fair percentage that included ROI fees in the hundreds or even thousands of dollars.
Now, we probably shouldn’t stop at $27 as our answer because $15 of that $27 is the standard witness fee. So, the average ROI cost alone looks like $12, or 6.7% of the $180 Flat Fee provided by the Fee Schedule.
Most copy services will tell you that ROI services charge WAAAY more than $12. That’s right, because we are talking about AVERAGES across ALL locations copied. If a copy service only deals with an ROI company on 15% of their locations, then the average ROI fee would be about $80 when encountered. But don’t get caught up in the individual bills… think of ROI fees as just a part of the operating costs of the Professional Photocopier, and use the AVERAGE amount ($12) across all transactions for forecasting and budgeting. I’m pretty confident in the numbers in this article, as they came from high volume, reliable sources that studied the fees in their business.
What should be expected if the ROI fees are un-bundled?
Let’s say the DWC agrees to un-bundle the ROI fees from the Flat Fee for the copy services, and also agrees to a Cost Of Living (COLA) increase in the $180 Flat Fee.
A COLA increase from 2015 will move the fee up to about $205… but, you should expect the DWC to REDUCE the flat fee by the average amount currently being paid for ROI now as part of the UN-BUNDLING. If the DWC used roughly the same data used here that shiny new $205 gets reduced to $193. Keep in mind, that is IF (notice all CAPS) the DWC comes up with a similar $12 figure. They could easily use “other data” to reduce the shiny new $205 by much more than just $12.
Assuming the DWC agreed and set the Flat Fee to $193 (from $180) and un-bundled the ROI fees, what did this accomplish? My position is that copy services accomplished NOTHING with respect to how ROI fees affected their margins. The copy services would have fought and used up valuable political capital with the DWC and not moved the VALUE of their services one bit. They simply gave up $12 (or whatever the amount) of revenue in the flat fee to un-bundle $12 of average ROI costs across their transaction inventory. It’s a “wash”, but they “spent” their Political Capital that could have been used for something more valuable to them.
What about asking for more than a COLA increase?
The applicant copy services COULD go into negotiations with the DWC asking for much more than just a COLA increase, but the prospects of that seem dubious to me. The DWC spent years and budgeted a fair amount of money on the BRG study. They held several contentious public hearings to get to the current Fee Schedule of $180 (and $75 for when there are no records). There is a mostly new regime at the DIR/DWC now, so the people there probably aren’t enthusiastic about doing all the work and research to give copy services an entirely new Fee Schedule with a significant bump in fees, AND un-bundling of ROI fees. I think most reasonable people would NOT expect the DWC to increase the fees much beyond a COLA increase for this cycle. Nor would most reasonable people expect the DWC to be very enthusiastic about un-bundling a fee and shifting it to the employers, and allow that fee to be unregulated. Unregulated Fees = Abuse, in this system.
Hidden costs of un-bundling
Let’s say for the sake of argument the DWC agrees to un-bundle the ROI fees. Under the current fee schedule, applicant copy services do all they can to reduce or eliminate ROI fees from their transactions. This is because it’s a direct cost against their revenue, so the lower the average ROI costs they pay, the more profit the copy service enjoys. Employers and other Payers enjoy having a FLAT $180 (plus sales tax) without any add-on fees when anticipating and paying their claims costs. So, what happens when the ROI fees are un-bundled?
Under this un-bundled scenario, applicant copy service invoices suddenly jump UP in value from $180 to much more when an ROI company is involved. This will irritate Payers and cause confusion about the billing compared to the historical flat $180. Applicant copy service invoices will be DISPUTED more often, rather than being paid a high percentage of the time like they are now. This hurts the copy service, drives up claim costs, and uses up valuable local Appeals Board time to resolve unnecessary disputes.
With the ability to simply push the added cost of copying on to the Payer in the form of un-bundled ROI costs, applicant copy services will be encouraged to use an ROI company as much as possible, and pay whatever is requested. Using an ROI service whenever possible will reduce the copy service’s own copying costs, so they will enjoy more profitability on their flat rate under the fee schedule. In other words, the incidence rate of ROI costs appearing in a transaction will go UP, and that will drive the average overall copy service invoice UP as well. More costs to the employer and Payer, and with it more dispute for the system to deal with. Shady players will appear on the scene posing as ROI companies, charging exorbitant rates, and the system will now have created a problem they have to “fix”.
The historical California Professional Photocopiers would be getting closer and closer to simply a Deposition Officer Service, and no longer be in the copying business.
Personally, when I consider all of the elements of this situation, un-bundling the ROI fees from the Fee Schedule seems counterproductive for Professional Photocopiers. I would rather push for as high a bump in the Flat Fee as possible, and then lobby for some additional regulation that supports fighting and driving off ROI companies that overcharge. The DWC could be lobbied to provide penalties and fees when ROI companies don’t play fair. The goal of a Professional Photocopier business is to make a profit, so I suggest the copy services try to get the regulated fee as high as possible, and then fight to drive the ROI and other costs down using traditional methods. This makes more sense to me than deliberately encouraging the DWC to cut the regulated flat fee down so that more money can be paid to ROI companies.
What is your opinion? Please let me know in the comments section, below.