Provider Choice Laws, Network Involvement, and Medical Costs.

By Richard A. Victor, Philip S. Borba, Dongchun Wang

December 1, 2002 Related Topics: Provider Choice

Treating providers have considerable influence over the course of medical care, the outcomes experienced by injured workers, decisions on return to work and the payment of permanent disability benefits. Advocates for injured workers argue that retaining control over the choice of provider ensures quality care and favorable outcomes. Advocates for payors maintain that employer control is consistent with quality medical care and is an essential tool to manage costs.

Focusing on cases that begin treatment within a network, this study examines the impact of state provider choice laws on the extent of network involvement and the resulting effect on medical costs. The impact of the provider choice laws on quality of medical care and other outcomes experienced by injured workers, an important part of the debate, is beyond the scope of this study.

Key Findings

  • Network involvement is significantly higher where the state law mandates employer control over decisions to change medical providers. As Figure A shows, employer control raises network involvement by 15 to 20 percentage points for treatment given at 4 to 9 months after an injury and increases to 25 to 30 percentage points after 10 months.

Note: 1997 injuries with experience through 1999.
Key: EE: employee; ER: employer.

A rough estimate of the cost impact of changing a state’s law from “employee choice” to “employer choice” is to reduce medical costs by 7 to 10 percent. Previous WCRI studies have shown that greater network involvement reduces medical costs, largely because fewer medical services are used by network providers. Despite fewer services, the studies conclude that duration of disability is not extended nor are indemnity costs higher – a “win” for workers and employers alike. Studies also show that worker satisfaction with medical care from network providers may be lower.

Extending the statutory period of employer control in California and Pennsylvania would increase network involvement and reduce costs. In California , extending the period of control from 30 to 90 days would increase network involvement by 7 percentage points. In Pennsylvania , extending the period from 90 to 120 days would increase network involvement by 10 percentage points. Increasing employer control to 180 days in these states would increase network involvement by 15 and 18 percentage points respectively.

Provider Choice Laws, Network Involvement, and Medical Costs. Richard A. Victor, Dongchun Wang, Philip Borba. December 2002. WC-02-05.

Copyright: WCRI

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Research Questions:

Should the law give employers or employees the right to select the treating provider? 

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