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Surgeons in Massachusetts almost uniformly refuse to accept the state fee schedule. They negotiate fees double or higher than the official levels. The common thread to these fee disputes seems to be an economic supply-and-demand problem. But is it really just that?

Two California physicians, Steven Levine and Ronald Kent, have just released the findings of a phone survey of neurologists and orthopedists in a number of states with low fee schedules for tests and surgeries. The subjects were asked if they accept workers' compensation patients, and if these patients absorb higher-than-average overhead expense.

Back in the 1990s, Medicare assessed the resources required to perform tasks and calculated a relative value for each of hundreds of procedures, from office visits to the most complex types of surgery. Medicare's reimbursements are now adjusted to these relative values, and the Workers' Compensation Research Institute tracks the use of Medicare as a baseline for workers' comp fees.

A workers' comp fee schedule that is, say, 150 percent of Medicare reflects these relative values. On the whole, pay is relatively high for office visits, but relatively low for procedures. Shortages of physicians linked to fees will first appear among specialists who do a lot of complex procedures. Levine and Kent selected "low multiple states" and found almost uniformly very low participation rates in workers' comp, well below 50 percent, even when compared with other low-reimbursing health insurance.

The researchers found in Texas, for example, that neurologists receive, at 125 percent of Medicare, 2.4 times the payment for seeing a workers' comp patient than they receive for seeing a Medicaid patient. Yet, four times as many Texas neurologists accept Medicaid as accept workers' comp, Levine and Kent found. Practice managers reported that the direct and overhead costs of managing workers' comp patients were significantly higher than those of other patients.

There appear to be four things to think about in solving supply-and-demand problems. First, each state is unique. Fee schedules vary. Ingenix, which is often hired by states to develop fee schedules, reports that a laminotomy--a form of spinal surgery--in one region in New York is scheduled at $3,186, and in a region in Texas at $1,084.

Second, doctors are acutely aware of added burdens in treating injured workers, such as utilization, reporting requirements and slow payment practices. Third, the problem is really one of pairing a usually limited supply of specialists to highly configurable demand. Smart claims payers know the doctors they want, and the fees needed to attract them. They express their priorities for timeliness and quality of reports. They reimburse within a month.

Fourth, some access problems are chronic. Alex Swedlow, who runs analytics at the California Workers' Compensation Institute, says, "Rural access is a known national problem that goes beyond workers' comp's ability to solve in isolation."

Levine and Kent did a valuable service to document why doctors boycott the workers' comp system. (For the entire report, please click here.)

And, I keep well under control my sympathies for claims payers who complain about rising medical costs, or access to care, yet make no serious effort to cultivate good business relations with clinicians.

PETER ROUSMANIERE, a Vermont-based consultant and writer, is the workers' comp columnist for Risk & Insurance®.

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September 1, 2007

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