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Jun
11

Controlling work comp medical costs – the impact of price

WCRI released the fifth edition of the Medical Price Index for Workers’ Comp yesterday (download available at no cost); analyzing 25 states that account for 80 percent of WC spend, the study focuses on prices paid for non-facility services and provides trends over time…here are a few highlights.  

  • Six states didn’t have fee schedules as of 2012; prices paid in those states were all significantly higher than the median of FS (fee schedule) states.
  • There was less variation in primary care than surgical services, with prices for surgeries in the highest price state almost five times higher than those in the lowest price state.  Primary care pricing varied by a factor of 2.5.
  • Prices increased significantly faster in non-FS states than in those with fee schedules, with Wisconsin’s prices up more than 50 percent more than the average of FS states.
  • Illinois, which underwent significant reform in 2011, saw a decrease of 24 percent in prices paid as a result; this drop was consistent across primary care and major surgery.  Notably, surgery prices are still more than twice the 25-state median, but that’s a lot less than rates pre-reform, which averaged 443 percent of Medicare.
  • Prices in states with fee schedules were – almost without exception – significantly lower than prices in non-FS states.  Often there were dramatic differences.
  • Prices paid in Massachusetts were above the median of prices paid in states without fee schedules.  This is somewhat counterintuitive, as Mass’ FS is generally considered to be quite low.

WCRI’s methodology has been consistent over time, relying on a marketbasket of services to assess changes in price (NOT utilization) over the years.  The data is especially helpful as it includes prices from services delivered less than a year ago; kudos to WCRI’s researchers – and the payers that supply the data – for dramatically improving the timeliness of their data.

Takeaways

Generally speaking, fee schedules do keep prices paid down.  However, given the high prices paid in Massachusetts, FS that are “too low” may result in providers refusing to accept FS, successfully demanding higher fees in order to provide services. Anecdotally I’ve heard this many times from my neighboring state.  Those with more specific knowledge (Anthony C perhaps?) may wish to weigh in.

Fee schedules tend to keep price increases down as well, thereby having a “dual” effect by checking current and future costs.

Note this study only addresses prices paid, and NOT utilization.  There’s been much research on this area; refer to WCRI’s other studies more insights.

What does this mean for you?

Fee schedules – reasonable ones – do tend to keep prices down, and likely costs as well. But fee schedules that are too low may well be ignored.  


3 thoughts on “Controlling work comp medical costs – the impact of price”

  1. Joe, reasonable fee schedules are essential to hold down WC costs in an efficient and predictable manner. Relying on “usual and customary” results in steering of patients to certain providers.
    I n addition, a pharmaceutical fee schedule reduces costs.

  2. Right you are Joe. Having first hand experience with MA I can tell you that to get (mostly facility or surgical services but other providers also) you have to throw the fee schedule away and negotiate directly with the fascility or provider (and of course the agreed upon charge will be more than the FS allowance). Playing hardball only delays the needed care and ultimately increases your costs over any FS savings.

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Joe Paduda is the principal of Health Strategy Associates

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A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.

 

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