ANNAPOLIS -- An attempt by the state's largest workers' compensation insurer to cut health care costs has doctors protesting that they are being squeezed and warning that patients may suffer the consequences.

The Injured Workers' Insurance Fund has contracted with Alliance PPO to provide health care for injured workers. IWIF refers workers' comp patients through Alliance to its network of physicians and reimburses them according to rates set by the PPO rather than those set by the state Workers' Compensation Commission.

But doctors are complaining that workers' comp patients are more expensive to treat and that Alliance's reimbursement rates are lower than those set by the state commission.

"No physician in the state wants to take PPO rates for workers' comp patients," said Dana C. Winkler, a physician and administrator for the Greater Washington Orthopaedic Group. "It's 10 times the work; it costs us more to see these patients."

According to the Injured Workers' Insurance Fund, the issue is a simple contract dispute. Doctors in the Alliance network signed a contract obligating them to accept Alliance's fee schedule. If doctors do not like the arrangement, they can leave Alliance's network.

"This is about doctors signing a contract to get access to patients, and then having to fulfill obligations under the terms of that contract," said Rudolph L. Rose, a lawyer with Semmes, Bowen and Semmes who is representing IWIF. "It's strictly a contract dispute; that really is the heart of it."

Last year, the Workers' Compensation Commission ruled in one case that it has no authority to interpret contracts between doctors and their insurance network, or to force the doctors to accept rates set by Alliance. IWIF is now appealing to the Montgomery County Circuit Court to allow IWIF to reimburse the doctors in that case -- and by extension, in all such cases -- according to the fee schedule set by the PPO.

Ray Howar, president of Rehab at Work in Rockville, said the Alliance fee schedule typically knocks 10 percent to 25 percent off the rates set by the state. The discrepancy is critically important to his physical therapy practice, he said, because IWIF patients constitute a large part of his business.

"We think the law is very clear in Maryland: This is against statute," Howar said.

If doctors are forced to accept low fees for workers' comp treatments, patients may be the ones who suffer, said Gene Ransom, legal counsel for MedChi, the state medical society.

"We already hear horror stories of people having to drive more than an hour to see specialties because of the low workers' comp reimbursement rates," Ransom said. "Obviously, if the insurance companies are allowed to reimburse physicians at rates less than the fee schedule, doctors are going to stop practicing workers' comp [medicine], or else those cases will be driven only to 'factory' physicians in large practices who can afford it."

Labor groups say they do not want anything to happen that winnows down patients' choice of doctors.

Susan Levitan, lobbyist for the Maryland AFL-CIO, likens the situation to the medical malpractice debate of 2004, when doctors threatened to quit or drop certain kinds of specialty care because of financial pressures brought on by the cost of their liability insurance.

"We want the best doctors for injured workers," Levitan said. "We want the best orthopedists, the best neurosurgeons. We want them to stay around."

Levitan stopped short of taking sides in the dispute but said, "We don't want people to drop out because they're not being paid enough."

Rose, who serves on the legislature's task force on workers' comp, said he doubts -- or at least hopes -- that doctors will not close their doors to patients because of the dispute over rates.

"The doctors in the Alliance network are better than that," he said. "They're more professional than that. They're not going to desert their patients."

Besides, Rose said, the fact that doctors are remaining in Alliance's network bears proof that the arrangement, while perhaps dissatisfying, is on the whole profitable for them.

"There's a reason they're not getting out," he said. "They're businessmen."

Ultimately, he said, the decision in the Montgomery County court case will apply only to last year's workers' comp cases because the state implemented a new set of fee regulations last fall. However, Rose said, he expects there will be a new test case this year that will decide how the new regulations are applied where PPOs are involved.

IWIF President and CEO Thomas L. Bromwell, a former Senate Finance committee chairman, criticized the Workers' Compensation Commission last month for constraining his use of PPOs and threatened to sue commission Chairman Thomas P. O'Reilly over the issue. Bromwell is expected to pursue some form of legislation this year that would affirm the use of PPOs in workers' comp cases.

So far, Bromwell has not filed a suit against O'Reilly.

O'Reilly has said he will consider reimbursement options beyond the state's rigid fee schedule -- cautiously -- and hopes to reach a workable solution outside of court.

This report originally appeared in The Business Gazette.