Rehabilitation clinics that treat catastrophically injured auto accident patients say that price controls in Michigan's new no-fault insurance overhaul will force them to drastically downsize or even close in the years ahead.

The overhaul, signed into law May 30 by Gov. Gretchen Whitmer, will introduce a fee schedule in July 2021 for hospitals, clinics and other medical providers that provide treatment to crash victims covered by no-fault insurance.

The fee schedule will be phased in over two years and ultimately pay stand-alone rehab clinics 190% of Medicare rates, or roughly what private health insurers such as Blue Cross Blue Shield currently pay some medical providers for various services and procedures. Hospitals with Level 1 trauma centers or that see a large number of low-income patients would get paid between 220% to 250% of Medicare rates.

But for specialty rehabilitation clinics that treat and house the most severely injured crash survivors, including those with traumatic brain injuries, many of their services will fall under a separate billing category because they have no Medicare equivalent.

The new law will put a hard limit on how much those clinics can charge no-fault insurance for these types of services: 55% of whatever amount each clinic billed at the start of this year, ultimately decreasing to 52.5% of that amount by July 2023.

The potential effects of that 55% billing cap was a hot topic Tuesday at a meeting in Novi of the Coalition Protecting Auto No-Fault, known as CPAN, which opposes the new insurance law and wants the state Legislature to loosen its price controls.

“We don’t make 45% profit, so for us, we have to cut" staff, said CPAN President John Cornack, who also operates the Eisenhower Center in Ann Arbor, which treats many auto accident survivors. "It really harms our post-acute industry."

Bill Buccalo, CEO of Rainbow Rehabilitation Centers, which treats about 600 patients a year at its 30 Michigan locations, many of them living at the centers' residential facilities, said the 55% cap would financially devastate Rainbow Rehabilitation and similar centers across the state.

More:Insurance official: No guaranteed savings under new Michigan auto law

More:Michigan car insurance bill signed into law by Gov. Gretchen Whitmer

There are fewer specialty centers for accident survivors in neighboring states such as Ohio, because private health insurance generally doesn't cover long-term residential rehabilitation programs — especially at the payment rates offered by Michigan's current no-fault insurance system, according to industry experts.

"The vast majority of our services are not coded under Medicare, so they are basically saying you have to take a 45% haircut," said Buccalo, whose Rainbow Rehabilitation Center employs about 900 people.

Buccalo speculates that lawmakers may have set the 55% billing cap with hospitals in mind. That is because hospitals' master price lists, known as chargemasters, often reflect big markups that are well above the usual amounts the hospitals will recover from private health insurers.

Hospitals are not typically paid 100% of their chargemaster prices.

Yet many specialty rehab centers such as Rainbow Rehabilitation regularly do receive nearly 100% of their billing amounts, Buccalo said.

“We don’t charge high rates and expect half," he said. "We charge a fair rate, and we expect to be paid what we charge. So to arbitrarily say, 'tomorrow you’re going to get 55%,' isn’t really a viable model for these businesses."

He added, “We need the Legislature to correct it, because I don’t think they intended it."

Michigan motorists will see the new auto insurance take effect a year earlier in July 2020, when they get a first-ever choice in the level of medical benefits in their auto insurance policies, ranging from zero to unlimited. Policies with less coverage are to have lower prices.

At the same time, the law will significantly raise minimum liability coverage requirements across the state.

The existing no-fault system requires that all insurance plans have potentially unlimited lifetime medical benefits, known as personal injury protection or PIP. Michigan is the only state with such a mandate, and often ranks as the state with the highest auto insurance premiums in the country.

ContactJC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on Twitter @jcreindl. Read more on business and sign up for our business newsletter.