Managing Costs

Physician Fee Schedule Impact Not Always as Intended

A new study examines the circumstances undermining the effectiveness of physician fee schedules.
By: | May 23, 2014

Large discounts off the workers’ comp physician fee schedule maximum allowable reimbursements do not ensure low prices. That is one of the takeaways from a new study on the price impact of physician fee schedules in the workers’ comp system.

NCCI applied its new Medical Data Call, a source of workers’ comp medical data that captured transaction level detail on medical bills processed on or after July 1, 2010, to determine the impact of fee schedules. Included were dates of service, charges, payments, procedure codes, and diagnoses codes for the 35 jurisdictions in which NCCI provides ratemaking services.

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“Properly designed physician fee schedules can help to contain workers’ compensation medical costs,” the report said. “While workers’ comp fee schedules have been shown to be effective at controlling costs, particular circumstances can undermine their effectiveness, such as when fee schedule amounts are high relative to group health.”

Physician fee schedules are a tool used to help contain workers’ comp medical costs. They specify a maximum amount that is reimbursable for various medical services as identified by Current Procedural Terminology code.

The researchers found that, in general, many workers’ comp payments are close to or at the maximum reimbursable level. “Whether due to negotiated arrangements between workers’ comp insurers and their provider networks or to doctors acting individually, this occurs so frequently to suggest that fee schedules, in fact, set the prices that many medical providers charge for workers’ comp services,” according to the report. “One consequence is that high maximum allowable reimbursements, relative to group health, may result in some providers charging workers’ comp claimants more than they would patients covered under group health.”

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Fee schedules for surgery are generally significantly higher in workers’ comp than in group health, the report said. Workers’ comp surgical payments tend to be closer to the maximum allowable reimbursements than the same services in group health. At the same time, reimbursements for evaluation and management were not substantially different.

“Presumably, a surgeon exerts the same amount of time and effort to handle a workers’ comp case as for any other medically similar case,” the report said. “The primary care physician on a workers’ comp case, however, is often burdened with additional evaluation and management services like filling out reports and coordinating care with case managers. Coupling this with the observation that compared to general health, workers’ comp fee schedules result in higher reimbursement rates for surgery than for evaluation and management suggests that this is an area where fee schedules could be made more equitable.”

Nancy Grover is the president of NMG Consulting and the Editor of Workers' Compensation Report, a publication of our parent company, LRP Publications. She can be reached at [email protected]

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The R&I Editorial Team can be reached at [email protected]