Comp Cost Escalation in California; No Answer in Sight

Comp Cost Escalation in California; No Answer in Sight

There are two key takeaways from the WCIRB report on California's work comp costs (as reported by

Medical costs are rising fast, and managed care costs are rising much faster.

Medical expenses climbed 7.9% last year, led by a ten percent increase in hospital expenses. Drug costs were up marginally while physician expense growth was flat.

Hospital costs are approaching a third of all medical expense in the Golden State and are growing despite a tighter fee schedule and all millions spent on 'medical management'.

There are two contributors to this unhappy circumstance. One is the double payment for surgical implants that occurs due to a loophole in the CA fee schedule. HSA clients report their costs for implants in California are much higher than in any other states driven by both price and more frequent usage of devices.

The second driver is the disconnect between utilization review and the bill review and payment function. As noted previously here, many UR determinations don't find their way thru the electronic labyrinth to bill review and payment.

Which is why there is so much frustration among employers forced to pay ever increasing fees for managed care services that, in many cases, do little to 'manage' claimants' care much less reduce costs.

The California reforms have done much to restrain cost growth but the individual rules and regs have often done harm as well as good. The pharmacy fee schedule and associated regs resulted in the explosion of physicians dispensing repackaged drugs at wildly inflated prices. The 24 visit cap for PT etc has resulted in too many visits for some claimants with modest injuries and too much hassle for all parties involved in complex claims. And the implant issue is exhibit one.

The stakeholders benefiting least from the reforms are the physicians.

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© Copyright 2009 by Joseph Paduda. All rights reserved. Reprinted with permission. This blog originally appeared on Managed Care Matters.