MEDICAL COSTS PER CLAIM FOR FLORIDA WORKERS’ COMP CLAIMS GREW, DRIVEN BY INCREASE IN PAYMENTS PER SERVICE FOR HOSPITAL OUTPATIENT SERVICES, REPORTS NEW WCRI STUDY

CAMBRIDGE, MA, July 29, 2009   –   Medical costs per workers’ compensation claim in Florida grew at a rate of five to seven percent annually in 2005 and 2006 after a period of stabilization in 2004 which immediately followed major reform legislation, according to a study by the Workers Compensation Research Institute (WCRI).

In 2003, Florida passed major reform legislation that affected many aspects of the workers’ compensation system in the state. Among those provisions affecting medical costs directly, one important element was the change in fee schedule rates effective in 2004—significant rate increases for physician services and rate decreases for many hospital outpatient services.

The WCRI study, Monitoring the Impact of 2003 Reforms in Florida: CompScope™ Medical Benchmarks, 9th Edition, analyzed claims with experience as of March 2007 and found that the five percent growth in medical costs per claim in the most recent study year 2006 was mainly driven by the significant increases in the average payment per service for hospital outpatient services. Previously in 2004, the average payment per service for most hospital outpatient services decreased at double-digit rates.

The study pointed out that changes in the fee schedule rates for most hospital outpatient services in 2004 and the corresponding adjustment of the parties in the system (providers, injured workers, and payors) may be related to the decrease in 2004 and the increase in 2006.

In November 2008, the Florida Three-Member Panel approved a new fee schedule for hospital outpatient charges that adjusts the Medicare-based fees by a hospital’s usual and customary charges. Future editions of the CompScope™ Medical Benchmarks will monitor the impact of this change on medical costs.

Starting in 2004, fewer workers received physical medicine services provided by hospitals after a more than 50 percent decrease in the average payment per such service in that year due to the fee schedule reductions.

Meanwhile, more claims had physical medicine services by nonhospital providers in 2004, which was likely tied to the fee schedule increases for physicians.

The study reported that prices paid for surgeries decreased nine percent in 2006 after increases in the prior two years following the fee schedule increase in 2004. Because of the decrease, the prices paid in 2006 for many of the most commonly billed surgeries, especially arthroscopic surgeries, were closer to the fee schedule rates, although still higher.

The study also noted that pre-reform, the prices paid for surgeries in the state were often negotiated at much higher levels than the fee schedule rates, which were among the lowest nationwide.

According to the study, medical costs per claim were stable in 2004, reflecting the offsetting effects of increases in prices paid for physician services and decreases in payments per service for hospital outpatient services. These results were consistent with the fee schedule changes effective January 2004.

The study also noted that in 2005, medical costs per claim grew seven percent in Florida. A main driver of that growth was the increases in prices paid for physical medicine services provided by chiropractors and physical/occupational therapists, which may be tied to the fee schedule increases in May 2005.

The 2003 reforms also increased the maximum number of visits allowed for chiropractor care. The average number of visits per claim to chiropractors had a small increase (from 12 to 13 visits) from 2003 to 2004, and then fell to 11 visits in 2005 and 2006.

Compared to other states in the study, the average number of visits per claim to chiropractors in Florida was fairly typical, but chiropractors were involved in fewer claims in Florida than in most other states in this study.

The Workers Compensation Research Institute is a nonpartisan, not-for-profit membership organization conducting public policy research on workers’ compensation, health care and disability issues. Its members include employers, insurers, and governmental entities, insurance regulators and state administrative agencies, as well as several state labor organizations.