In state workers’ compensation systems, it is essential to follow the flow of payments to identify cost drivers and evaluate the effectiveness of medical management interventions, according to the independent Workers’ Compensation Research Institute (WCRI). CompScopeTM Medical Benchmarks, 10th Edition, a new report from the WCRI, is a comprehensive resource that examines and compares workers’ compensation experience in 15 states: California, Florida, Illinois, Indiana, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, North Carolina, Pennsylvania, Tennessee, Texas, and Wisconsin.
The report features detailed measures of medical prices, payments, and utilization by provider type and service group in each state. For example, the July 2010 edition identifies changes in treatment patterns, atypical medical payments per claim, where under- or over-utilization of services may be occurring, and consequences associated with restrictions on access to care. Researchers asked two key questions:
- How do medical prices, payments, and utilization per claim differ across states for similar injuries and types of workers?
- How have medical prices, payments, and utilization per claim changed over time within each state, and what are the major drivers of those changes?
Illustrative Findings
Illinois: After a medical fee schedule was adopted in 2006, growth in medical payments per claim slowed to 5 percent for 2007 claims with more than seven days of lost time and 12 months of experience. This slower growth was in contrast to the 12 percent average annual growth in the three years prior to the implementation of the fee schedule in Illinois, where employees choose their own workers’ compensation medical provider. The decrease in the rate of growth likely reflected the impact of regulations on non-hospital and hospital providers, WCRI reported.
Louisiana: Medical costs per claim in Louisiana were among the highest of the 15 study states, largely because of higher utilization and higher prices paid for services that are delivered in the majority of claims, such as office visits, diagnostic tests, and physical medicine. In addition, injured workers in Louisiana received medical treatment for a longer time than in other study states. The average duration of medical treatment was 45 weeks in Louisiana, about six weeks longer than in the typical study state, WCRI reported.
Wisconsin: Medical payments per claim (for claims with more than seven days of lost time and 36 months’ maturity) were fairly typical of the 15 study states, a result of higher prices paid offset by much lower utilization of medical services. However, over the five-year study period, medical payments per claim grew faster than in other study states—64 percent compared to 40 to 50 percent in most study states. Reasons cited for the rapid growth in medical costs per claim in Wisconsin include reimbursement paid to non-hospital providers such as physicians, physical/occupational therapists, and chiropractors, and payments-per-hospital outpatient service. These rates rose faster in Wisconsin than in many study states.
Massachusetts: Medical costs per claim in Massachusetts in 2007 were 45 percent lower than the norm for claims with an average of 12 months of experience and more than seven days of lost time. WCRI reports several related factors: hospital inpatient and outpatient payments per claim among the lowest of the study states, lower prices paid for non-hospital services (except surgeries), and lower utilization of most non-hospital services.
Fee ScheduleImpacts
In a related study, Benchmarks for Designing Workers’ Compensation Medical Fee Schedules: 2009, published in June 2010, the WCRI reports that a medical fee schedule was used as a cost-containment tool in 43 states last year. “The designing or updating of fee schedules is often subject to political pressure from payers and providers and involves a delicate balance,” WCRI researchers said. “If fee schedule rates are set too high, their effectiveness as a cost-savings tool is limited; if fee schedule rates are set too low, treating injured workers may be uneconomical for providers and may jeopardize workers’ access to quality care.”
To help clarify these issues, the report compares workers’ compensation and state Medicare fee schedules as of December 2009, focusing exclusively on non-hospital and non-facility charges. Among the findings:
- Substantial differences in workers’ compensation fee schedule rates exist among states in comparison to Medicare. The premium varied from 8 percent above Medicare in Massachusetts to 215 percent above Medicare in Alaska.
- Interstate variation in fee schedules was not necessarily related to interstate variation in expenses incurred by medical providers, e.g., malpractice insurance and office practice costs.
- Many state fee schedules may create financial incentives to overuse invasive and specialty care. Nine states, however, set rates that resulted in the premium over Medicare being relatively the same (within 45 percentage points) for each of the eight major service groups, which WCRI said may help neutralize some utilization incentives.
Some states may have set fee schedule rates for certain service groups that may be below an optimal level, raising concerns about access to quality care. The most likely candidates are states with fee schedules that are near or below the state’s Medicare rates.
