Medical Payments Per Claim in California Grew Again after Period of Large Post-Reform Decreases

CAMBIDGE, Mass.--(BUSINESS WIRE)-- Medical costs per workers’ compensation claim in California grew nine percent in 2007 after large decreases from the reforms in prior years, according to a new study from the Workers Compensation Research Institute (WCRI).

The study, Monitoring the Impact of Regulatory Changes in California: CompScope™ Medical Benchmarks, 10th Edition, reported that the increase in medical costs per claim in 2007 for claims with more than seven days of lost time and 12 months of experience followed an overall more than 30 percent decrease from 2002 to 2005 due to a number of regulatory changes.

The reforms led to a marked change in the interstate comparison of medical costs per claim for California, according to Cambridge, Mass.-based WCRI.

Pre-reform the average medical cost per claim in California was the highest of the 15 states studied. In contrast, post-reform this measure became lower than typical for 2005 claims with 36 months of experience

The study reported that the average payment per claim to nonhospital providers (i.e. physicians, chiropractors, and physical or occupational therapists) in California increased nine percent in 2007/2008, after significant decreases in 2004 and 2005 due to reforms.

The growth in nonhospital payments per claim was a main driver of the growth in medical payments per claim in 2007/2008. In addition, payments per claim to hospitals had a moderate increase of four percent in that year.

Part of the growth in nonhospital payments per claim in 2007/2008 was driven by a 14 percent increase in the average price paid for office visit services, which was a result of a fee schedule change in February 2007.

However, even after the 2007 fee schedule increase, the average price paid for office visits in California was still among the lowest of the study states. In addition, prices paid for other major nonhospital services – such as physical medicine, radiology, surgeries, and neurological testing – remained stable in 2007.

Compared to other study states, prices paid for most nonhospital services in California were lower than or similar to the prices typically paid in the 15-state median in 2007, except for the price paid for neurological testing services which was higher than typical. This resulted from relatively lower fee schedule rates in the state, according to WCRI.

The WCRI study also found that utilization of most nonhospital services in California remained fairly stable in 2007/2008 after previous reform-related decreases. Particularly, the number of visits per claim for physical medicine services changed little in 2007/2008 after the substantial decreases from 2003 to 2005 due to the reforms, especially the 24-visit cap on physical medicine treatments.

The study also found that the average payment per claim for facility services associated with surgical procedures in California increased steadily starting in 2005, after a one-year significant decrease from the reforms in 2004. In 2007/2008 this measure had a six percent increase, which was another factor underlying the growth in medical payments per claim.

The steady growth in facility payments per claim was driven by continuous increases in the average payment per service for facility services from 2005 to 2007.

Furthermore, medical cost containment expenses per claim continued to grow steadily in California during the reform period from 2003 to 2005, according to an earlier WCRI study.

This pattern may be related to some reform provisions, such as adoption of a mandatory medical treatment utilization schedule and mandating utilization review programs.

Compared to other study states, the average medical cost containment expense per claim in California was among the highest for post-reform 2005 claims with 36 months of experience.

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.

To order this report, go to the WCRI web site: www.wcrinet.org.

Workers Compensation Research Institute
Richard A. Victor, 617-661-9274

Source: Workers Compensation Research Institute