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The National Council on Compensation Insurance looked at six examples of how workers' comp medical payments responded to changes in fee schedules for particular services.

Physician fee schedules specify the maximum allowable reimbursements for medical services provided to treat workers' comp claimants. They are used by many states to effectively help control medical expenditures -- which amount to about 50 percent of workers' comp costs in most states.

The study looked at the average payments in workers' comp between 2002 and 2006 for several medical services related to the change in the fee schedule amount during that time period. The study found the following factors particularly affect changes in workers' comp medical prices:

• The change in average workers' comp reimbursements resulting from a change in a state physician fee schedule for a given service depends heavily on the relationship between the fee schedule and the market prices for the medical services.
• Workers' comp fee schedules are more effective at controlling the cost of high-volume low-priced procedures than low-volume high-priced procedures.
• The impact of increasing a workers' comp fee schedule maximum reimbursement is not simply the reverse of decreasing the scheduled amount

Fee schedule maximum amounts do not apply to all types of medical providers and services in the workers' comp system. For example, certain facilities may not be subject to a fee schedule, and provider network agreements or a negotiated discount on a complex hospital bill can effectively bypass the fee schedule.

The six case studies included in the research are from different states and different types of procedures. Cases were selected to illustrate the considerable variety in relationships between fee schedules and distributions of reimbursements.

The workers' comp reimbursements were compared to the market price of each service, based on the median payment in general health care.

In the case of a fee schedule change for treatment of burns in Georgia, the net result was that the average workers' comp payment for the procedure grew less than the change in the fee schedule. The 2002 fee schedule was less than the market price, while the 2006 amount was generally higher.

Despite that, the workers' comp reimbursement rate in 2006 was concentrated at the fee schedule maximum -- above the market price. "This scenario shows the potential for a workers' comp fee schedule to artificially increase costs when its maximum reimbursements are set too far above their market price," the study said.

In an example of office visits in Kentucky, the 2002 fee schedule was above the median amount paid in group health and it increased more than the average payment between 2002 and 2006. But the average workers' comp payment did not increase by as much as the fee schedule.

The case shows that "increasing a high maximum reimbursement can result in a smaller increase in workers' comp payments," the study said. However, it was another example showing that a maximum allowable reimbursement "set above the usual market payment can result in workers' comp reimbursements averaging more than the market rate."

The other case examples and some of the results included:

• Physical therapy in Maryland -- showed that in the absence of inflation, increasing maximum reimbursement that is below the market price can significantly increase workers' comp payments. Also, it showed the average workers' comp reimbursement responds to more than just the fee schedule, such as utilization and billing practices.
• Carpal tunnel surgery in Florida -- indicated that setting the fee schedule at or above the market rate does not ensure that most workers' comp reimbursements will not exceed the schedule. Also, comparing the workers' comp proportion of payments that exceed the fee schedule with that for group health can identify potential abuses and suggest reforms.
• ER visits in Alabama -- illustrated the fact that the presence of a fee schedule may not change the shape of the reimbursement distribution, and that fee schedules are not always effective at controlling facility fees.
• Radiology in Oregon -- showed that component payments produce a distinctly different pattern for the reimbursement distribution. Also, low inflation and regular maintenance can help fee schedules keep prices paid for care on workers' comp cases consistent with the medical marketplace.

Read more at the WorkersComp Forum homepage.

May 5, 2011

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