Calif. Work Comp: Part 1, the Fee Schedule Debate

Tuesday, September 7, 2010 | 0

By Joe Paduda
CompPharma

There's a lot going on in California's workers' comp system medical costs zooming up and driving premium increases along the way, narcotic usage skyrocketing, a dramatic increase in scripts for medical foods and compounds, judges upholding controversial decisions, and momentous decisions re changes to the fee schedule. Add the continued news about rising hospital costs and you've got more than enough activity to keep anyone busy.

We can't cover all the issues here, so a summary will have to suffice promise to dig deeper into a few later this week and into next.

First, the controversy over changing the workers' comp fee schedule.

California does not currently use Medicare's Resource Based Relative Value Scale (RBRVS) methodology as the basis for its non-facility fee schedule, making California the only fee schedule state to not use RBRVS. (The other states that don't use usual and customary rates, and I'd argue they really don't have 'fee schedules' in the true sense of the term).

The state has been considering moving from its current methodology the Official Medical Fee Schedule, or OMFS, to RBRVS for several years, with considerable progress over the last couple of months.

Most recently, public hearings were held in Sacramento with various stakeholders asked to respond to the latest revisions to the suggested fee schedule, revisions that added an additional $52 million in projected physician payments. I'll spare the details on the methodological discussions, which have to do with changing the conversion factor, one of the components of the RBRVS pricing methodology. (Workcompcentral.com posted on this Aug. 18). The basic argument advanced by providers is, well, pretty basic if you reduce reimbursement, there may well be an access problem as providers opt out of workers comp.

According to Workcompcentral.com:

"Destie Overpeck, the DWC's chief counsel, said she was encouraged that most of the providers in the audience seemed to support the division's multiple conversion factor plan, or at least understood it was needed to smooth the transition to a new system.

Primary care physicians, occupational therapists and providers who bill under the "all other" category would generally see an increase in payments, Overpeck said. "They seem to be saying, 'Hey, we understand it's not as high as we want or would get with a single conversion factor, but if you lower the rate on surgeons too much they won't be there anymore," she said.

There is some evidence that lower work comp reimbursement does impact provider participation. When Florida increased reimbursement over a decade ago, anecdotal reports indicated more surgeons started accepting work comp patients. A pretty solid research effort (albeit one specific to neurologists) presented at the meeting showed a strong correlation between reimbursement rates (as a percentage of RBRVS) and provider participation rates. According to the study, "G(eneral) M(edical) fee levels provide the highest correlation (90.7%) with neurologist willingness to accept workers' compensation patients."

The study also noted "a modified RBRVS medical fee schedule set at 156% of Medicare for evaluation and management fees and 121% for all other fees (an often-discussed plan) would result in a neurologist WC participation rate of 12.0%, third lowest in the U.S."

(A Methodology for Predicting Provider Participation in Workers' Compensation  Medical Fee Schedules Stephen E. Levine, M.D. Ph.D. and Ronald N. Kent, M.D.)

Perhaps the key point was best made by Kent Spafford, chief executive officer of OneCall Medical, the leading work comp imaging company. Spafford noted, "The California Workers' Compensation Fee Schedule is designed to provide adequate compensation to providers, so they are willing to provide care to injured workers. It is not the vehicle to control costs. Any action relative to the fee schedule should be designed to induce current and future providers into the system and not disenfranchise the existing providers."

Recognizing OneCall is keenly interested in the fee schedule as it bears directly on the company's ability to profitably operate in the state, Spafford's comments are nonetheless well worth consideration. Without reasonable access to care, disability durations may well increase, the quality of care decline, and system costs continue their current upward trend. Notably, access under the current OMFS is pretty good, with 90% of patients reporting 'good access to quality care'; the access problems that did occur weren't related to cost but to administrative hassles, language issues and UR delays. As access is good under the current system, one has to consider the possible benefits of reduced prices for some providers and some services in light of possible decreased access.

Moreover, as I've discussed here on numerous occasions, price per service is but one of, and certainly not the most important, contributor to total cost. As we've seen with California's revised drug fee schedule, cutting price often doesn't reduce cost in fact, total drug costs in California went up, way up after the fee schedule was slashed.

I'll draw a distinction between physicians and hospitals; as I'll discuss tomorrow, California's hospital costs are high and trending higher, with no likely end in sight.

California's Division of Workers Compensation is working diligently to balance the cost/access equation. I'd suggest that a careful and thorough assessment of hospital costs may well indicate there are lots of dollars to be saved, dollars that won't compromise access.

Joe Paduda is co-owner of CompPharma, a consortium of pharmacy benefit managers and owner of  Health Strategy Associates, a Connecticut employer consulting firm. This column was reprinted with his permission from his blog, http://www.managedcarematters.com