Study finds fee schedules key to controlling costs, but can be improved
According to the study, cost containment is critical to maintaining a viable workers' comp system. Specifically, researchers said the rising cost of delivering health care services underscores the need to control workers' comp medical costs. Fee schedules > are the oldest and most widely used device to regulate these workers' comp medical payments. However, many questions remain as to what makes for an effective fee schedule.
Although previous studies have compared < fee schedules > with various other price tables, NCCI said none have looked directly at how workers' comp < fee schedules > perform within the broader health care delivery system. The new study examined state fee schedule designs and the relationship between workers' comp reimbursements and those for employer-sponsored group health in the state. Generally, the study found that most schedules are working. However, researchers identified problem areas regarding specialty medicine and examined other areas for potential improvement.
About the study. For the study, researchers analyzed medical care provided from 1996 to 2004 in 28 states where NCCI provides rate-making services. For half of those states, researchers said that they had a sufficient volume of data for both workers' comp and group health to make utilization comparisons based on a dozen common injuries.
Researchers said there are essentially two kinds of workers' comp medical < fee schedules >, based on either what services should cost as determined by special studies and what providers are billing for their services. Schedules based on what services should cost reference a Relative Value Scale. RVS schedules are based on analyses of the resources of time, equipment and expense required to deliver the various medical services. The Medicare Resource-Based RVS, or RBRVS, is used by many states as the starting point for their workers' comp < fee schedules >. However, state < fee schedules > generally allow a higher maximum fee than the Medicare reimbursement amount.
Schedules based on what providers bill typically reference tables of usual, customary and reasonable charges. While, group health insurers traditionally geared reimbursement to UCR charges, researchers said these insurers increasingly follow the Medicare RBRVS reimbursement.
Study highlights major findings. Researchers highlighted several major findings in the study, including:
--< Fee schedules > help states control costs. Researchers found that states without workers' comp < fee schedules > had higher medical costs.
--Effective schedules set maximum allowable fees. Researchers said the most effective < fee schedules > were those that set maximum allowable fees that were no more than 40 percent above Medicare. In practice, that was only achieved among < fee schedules > based on what reimbursements should be (RVS approach), as opposed to schedules geared to what is being billed (UCR approach).
--Utilization not higher when prices are lower. When the comparison is made between states and on an overall basis, the study found that utilization was not higher when prices were lower. In general, researchers said greater utilization of workers' comp services than for group health was a commonality among states that was not responsive to the presence or design of a fee schedule. Previous studies have suggested that within a geographic area, utilization was responsive to < fee schedules >.
Researchers said it is also important to appreciate that this observation applies only at an overall basis and does not consider specific procedures or what happens when particular prices are set artificially low or high. More research is needed to understand the complex relationship between price, utilization and accessibility of specific medical services, the study concluded.
--The effectiveness of < fee schedules > varies by type of service. The study found that workers' comp < fee schedules > were best at controlling physical therapy and were generally effective at controlling the cost of primary care. However, < fee schedules > were less effective at specialty care, such as radiology and surgery. Although < fee schedules > may be less effective at controlling the price of radiology and surgery, researchers said the lack of any maximum fee for those services is of still greater concern, since that is associated with much higher workers' comp medical costs.
--Effectiveness of a fee schedule enhanced with the use of provider networks.
According to the study, this point illustrates that workers' comp < fee schedules > do not act in a vacuum. Researchers said they should serve as starting points in a negotiation process between workers' comp insurers and medical providers. Accordingly, the study found that < fee schedules > may help to level the playing field for workers' comp insurers. This can be especially important, researchers said, when the workers' comp niche within the health care delivery market is too small to enable insurers to effectively negotiate discounted fees. For example, NCCI said radiology and surgery are both areas where many state < fee schedules > could be lowered while remaining significantly above group health, thereby helping workers' comp insurers negotiate a better deal without an adverse impact on the availability of care to injured workers.
Because workers' compensation < fee schedules > have been around for so long, it is tempting to discount them as a viable tool for workers' compensation reform. Policymakers, however, should look beyond the initial role of < fee schedules > as only price controls and come to view < fee schedules as one way to help workers' compensation insurers build networks that deliver high quality, readily accessible, and cost-effective medical care.
May 6, 2008
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