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Workers' Compensation

WCRI Study Says California Saw Five Percent Decrease in Medical Payments Per Claim in 2013

According to a study recently released by Workers’ Compensation Research Institute (WCRI), California enjoyed a five percent decrease in medical payments per workers’ compensation claim in 2013 on a year-over-year basis, likely reflecting the early impact of the so-called reforms contained in Senate Bill (SB) 863 that became effective January 1, 2013. The WCRI study, entitled “CompScopeTM Medical Benchmarks for California, 16th Edition,” by Rui Yang and Roman Dolinschi, is part of a larger series that annually analyzes the performance of the workers’ compensation systems in 17 states (Arkansas, California, Florida, Georgia, Illinois, Indiana, Iowa, Louisiana, Massachusetts, Michigan, Minnesota, New Jersey, North Carolina, Pennsylvania, Texas, Virginia, and Wisconsin). Those 17 states represent more than 60 percent of the nation’s annual workers’ compensation claim payments.

Senate Bill 863

Those in the workers’ compensation world will recall that SB 863 contained a host of major and minor modifications to California law. Among the more important provisions were:

> The adoption of a Medicare resource-based relative value scale (RBRVS) for professional fees;

> The reduction of ambulatory surgical center (ASC) fees from 120 percent to 80 percent of Medicare hospital outpatient rates;

> The elimination of separate reimbursement for implantable medical devices, hardware, and instruments for spinal surgeries;

> The creation of an independent medical review (IMR) process for medical treatment disputes and an independent bill review (IBR) process for billing disputes;

> The establishment of a $150 lien filing fee and a $100 activation fee for liens already filed.

Reduction in Ambulatory Surgical Center Payments Key to California’s Overall Reduction in Per Claim Decrease

According to the WCRI study, a key driver in the overall five percent reduction in California medical payments per claim was a 24 percent reduction—per SB 863—in ASC facility payments per claim. The researchers judged this reduction as quite significant, since the measure increased in most of the study states in 2013. That median growth rate was approximately six percent. The average payment per claim for other nonhospital services in California decreased six and one-half percent in 2013, while the average payment per claim for hospital services was essentially unchanged.

Transition to Resource-Based Relative Value Scale Fee Schedule

In line with California’s transition to a RBRVS-based fee schedule for professional services that began January 1, 2014, under which primary care fees gradually increase and fees for specialty services gradually decrease, the WCRI study noted increases in the prices paid for office visits, physical medicine, and minor radiology in 2014. Decreases in the prices paid for surgery, major radiology, pain management injections, and emergency visits were similarly observed. The researchers noted, for example, that surgeon fees for most major surgeries in California saw double-digit decreases in 2014, following SB 863. The decreases in prices paid for specialty services were, however, essentially offset by the increases in prices paid for primary care.

Drawing data from a separate WCRI study, the researchers observed that prior to SB 863, the prices paid for office visits in California were among the lowest of any state whose data is studied—32 percent below the median. After the price increases allowed by SB 863, California was still below the median—by 13 percent—but the gap was beginning to disappear. As the transition to RBRVS fees called for in SB 863 became effective, the prices paid for major surgeries in California became 11 percent below the 28-state median (detailed in WCRI’s separate study), but still keeping the state in the middle group of study states.

Billing Behavior

Associated with the transition to an RBRVS-based fee schedule, California’s medical billing patterns or “behavior” changed, according to the researchers. For example, the growth of more frequent billing of more complex office visits seen prior to the enactment of SB 863 ceased. Moreover, as SB 863 replaced the commonly billed Current Procedural Terminology (CPT) codes for reports, record review, and office consultations with a new state-specific set of codes for reports, record review, etc., billing behavior began to change as well.

Medical Payments Per Claim Remain High in California

Despite the overall five percent reduction in the average medical payment per claim in 2013, payments per claim were still higher in California than most of the other study states, indicated the researchers. They saw two causative factors:

> A higher percentage of claims (28 percent) with more than seven days of lost time, compared with other study states; and

> Higher utilization. That is to say that for 2011 claims with more than seven days of lost time and 36 months of experience, injured workers in California used many nonhospital services at a greater level than similar workers in other study states.

The researchers noted that one important factor that appeared to drive the high cost of nonhospital care in California was a higher number of visits per claim compared to other study states. The researchers indicated this was likely associated with California’s longer average period of medical treatment than in other study states.

Caveat: Had Medical Payment Costs Per Claim Begun to Moderate Before SB 863

Did SB 863 cause the full five percent reduction in medical payments per claim in California? It is difficult to say. In May 2014, I examined the 14th edition of WCRI’s California benchmarks study [see /legalnewsroom/workers-compensation/b/recent-cases-news-trends-developments/archive/2014/05/18/wcri-continues-to-build-baseline-to-monitor-impact-of-california-s-workers-compensation-reforms.aspx], wherein the researchers observed that while medical payments per California comp claim had grown rapidly from 2006 to 2009, such costs per claim had already begun to moderate in the two years preceding passage of SB 863. This latest important WCRI study points to more than a mere “moderation,” however. The study reports a strong correlation between SB 863’s “reforms” and reductions in cost. While there may be other factors at play, next year’s WCRI study should cast additional light on how successful the SB 863 reforms have been in reducing per claim costs.

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