Tennessee: Reforms lowered costs in specific areas of comp system
Legislative reforms have lowered costs in specific areas of Tennessee's workers' compensation system, according to a report.
The study by the Workers Compensation Research Institute in Cambridge, Mass., found that the reform provisions enacted in 2004 related to permanent partial disability or lump-sum payments had a large and sustained impact on the average PPD/lump-sum payment per claim with more than seven days of lost time and PPD or lump-sum settlement. The average PPD/lump-sum payment per claim in Tennessee decreased 11 percent for claims with 36 months of experience.
Researchers noted that the reforms also resulted in stable growth rates of the average PPD/lump-sum payment per claim for less mature claims. Since 2005, the average PPD/lump-sum payment per claim grew in line with the changes in wages.
Among the highlights of the study, researchers found that:
- Medical costs per claim decreased. Tennessee implemented medical fee schedules for services delivered on or after July 1, 2005. As a result of the reforms, the study found that the average medical cost per claim with more than seven days of lost time saw a one-time decrease of 11 percent in 2006 claims evaluated in 2008. Without the reforms and assuming continued steady growth, researchers said medical costs per claim would likely have grown 6 percent (annual average percentage change from 2001 to 2004). In the year following the introduction of the fee schedule (2007 evaluated in 2008), the growth in the medical costs per claim resumed at 8 percent, which the study found was driven by factors other than nonhospital prices paid.
- Incentives created for evaluation and management services. Researchers said the new fee schedule may also have created incentives to increase the use of evaluation and management services (office visits) and reduce the use of invasive and specialty care. The price paid for evaluation and management services grew 23 percent from 2004 to 2006 and an additional 6 percent in 2007. The study noted that the latter increase was in line with Medicare annual updates to the fee schedule.
On the other hand, researchers said prices paid for invasive care -- major surgery such as arthroscopic knees and shoulders -- decreased 18 percent from 2004 to 2006. Furthermore, prices paid for major radiology services (MRIs and CT scans) decreased 6 percent and minor radiology (X-rays) decreased 27 percent from 2004 to 2006.
- Reforms impacted attorney involvement and payments. The average defense attorney payment per claim with more than seven days of lost time and payment greater than $500 decreased by 20 percent in 2005 evaluated in 2008. Researchers said this was due to the introduction of the mandatory review conferences, establishment of the medical impairment registry, and PPD reforms. Reforms to the state's dispute resolution process resulted in a $600 per claim decrease in the average defense attorney payment per claim in 2005 evaluated in 2008, compared to the pre-reform period (2003 evaluated in 2006).
- Timeliness of indemnity payments improved. The reforms also addressed the timeliness of the first indemnity payment to injured workers by implementing a penalty program for late payments. As a result, researchers noted that since 2005, more injured workers in Tennessee received their first indemnity check within 21 days of injury. Despite this improvement, Tennessee remained slightly below the typical study state in 2007 evaluated in 2008.
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April 12, 2010
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