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Workers' Compensation

New Study on Low Back Pain Examines Costs and Benefits of State Workers’ Compensation Policy Variations

While employer control reduces medical costs, allowing employees a one-time change in physician may not be as expensive as employers fear

By Thomas A. Robinson, co-author, Larson’s Workers’ Compensation Law

According to a recent study published in the Journal of Occupational and Environmental Medicine, states that give an injured employee broad latitude in choosing the initial treating provider have higher average medical costs and longer average length of disability for claimants than states that allow the employer to make the initial treating provider choice, at least for workers’ compensation claims involving lower back pain [see “Length of Disability and Medical Costs in Low Back Pain,” by Mujahed Shraim, MPH, PhD, et al., October 20, 2015; doi: 10.1097/JOM.0000000000000593].

That was one of several findings researchers gleaned when they dovetailed a large workers’ compensation database of a single private insurer containing more than 59,000 cases from 48 states and the District of Columbia with state-by-state workers’ compensation policy information supplied by the US Chamber of Commerce and Workers Compensation Research Institute. The policy comparison covered a time period beginning in 2002 and ending in 2008. The large number of cases represented almost 10 percent of the U.S. private workers’ compensation market.

While that finding regarding employer designation of treatment providers might be music to the ears of many employer groups who see employer control of medical care as the key to overall cost containment, the study also noted that while the average length of disability was lower in states that restrict a dissatisfied employee’s ability to change the health care provider than in states with no such restrictions, there was no corresponding reduction in average medical costs. Allowing the injured employee a say in his or her treatment is not, therefore, always expensive. The researchers posit that when injured employees feel dissatisfied with a medical provider—particularly early in the treatment process—the inability to change treating physicians may lead to mistrust of the system generally and second-guessing of the treating physicians decisions in particular, resulting in longer disability periods and increased medical care costs.

Key State-By-State Variables

While there are, of course, considerable differences between and among the states in their handling of wage replacement benefits and provision for medical care for injured employees, the researchers concentrated on a number of specific workers’ compensation policies that may vary from state-to-state:

> Wage replacement percentage (e.g., where the injured worker receives 2/3rds of his or her AWW);

> Duration of waiting period (number of days before an injured worker is eligible for indemnity benefits);

> Retroactive period (number of days before the injured worker is eligible for indemnity benefits covering the waiting period);

> Employee’s or employer’s ability to choose initial treating provider or change treating provider;

> Medical fee schedules that set the maximum reimbursement amount for medical services from a provider.

Study’s Findings

After adjusting for interstate differences in individual-level variables, the researchers uncovered in some cases exactly what one might expect to find: for example, as noted above, where employers choose the initial caregiver, overall average medical care costs are lower. However, the researchers noted no significant associations between the length of a state’s waiting period or the presence of a medical fee schedule and the average medical costs per case. An increase in the relevant waiting period was associated, however, with an increase in the length of disability. An increase in the retroactive period also tended to extend the average length of disability, but not nearly as much occurred with an increase in the waiting period. The researchers acknowledged that critics of waiting periods have for years argued that they are counter-productive, that they only provide an incentive for the injured worker to remain out of work for a longer period of time in order that he or she can qualify for some temporary disability indemnity. This study would appear to support that criticism.

Suggestions Based Upon the Study’s Findings

Based on this analysis, the researchers suggest that a shorter retroactive period and early referral of injured workers to qualified caregivers might reduce both average medical costs and the average length of a worker’s disability. And while employer involvement in physician choice does appear to bear dividends in terms of cost containment, allowing the injured worker to change treating providers, at least in some instances, might result in better outcomes and cost savings.

The study pops the balloon of those who see medical fee schedules as a key to overall medical cost containment in workers’ compensation cases. The study actually supports the view that such schedules are counter-productive in that they are associated with longer average length of disability for injured employees.

Study Limitations

The researchers acknowledge that their study, like virtually all studies, has limitations. The database, for example, contained no information related to the severity of the injury or the functional limitations suffered by an injured employee. One would expect that with more severe injuries would be associated with higher medical costs and longer terms of disability. The same is true for patients encountering more severe functional limitations. The study could not allow for differences that might be associated with other important predictors of disability duration, such as occupation, physical demands of the job, and the like. The researchers also noted that their analysis of the costs associated with allowing provider choice/change was based on state workers’ compensation laws. The researchers observed that they had no information about whether employees and/or employers actually exercised the rights that were mandated in those laws.

Conclusion

For those who clamor for greater employer control of the medical treatment process, this study provides some important supportive findings.  On the other hand, the study appears to suggest that the best alternatives come from a combined approach, with strong employer participation, yes, but where the situation also allows some flexibility in physician choice on the part of the injured employee. The study also undercuts, at least to some degree, the notion that medical fees schedules are an effective mechanism in monitoring workers’ compensation medical costs. Additional study is necessary to determine if the trends and results found in analyzing this large cohort of lower back pain cases can be repeated across the board.

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