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Flat-fee health plans seen driving more workers comp cases

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As flat-fee, or capitated, health plans become more widespread, health care providers could begin classifying more soft tissue conditions as work-related injuries, according to the Workers Compensation Research Institute.

Under such plans, health care providers are paid a set amount for each patient regardless of how many services or how much care they provide.

Such plans are becoming more common as the Patient Protection and Affordable Care Act looks to expand the use of accountable care organizations, Cambridge, Massachusetts-based WCRI said in a report released Tuesday. “This provides strong incentives to classify patients' injuries as workers compensation cases where possible,” to receive fee-for-service payments.

However, workers comp pays for medical care only when a condition arises “out of and in the course of employment,” and there is less certainty about whether soft-tissue conditions are work-related than traumatic injuries, according to the study. Soft tissue injuries include a back sprain or strain.

“Patients covered by capitated group health plans were 11% more likely to have their soft-tissue conditions called work-related,” the study says. “This wasn't true for traumatic injuries, such as fractures, lacerations and contusions.”

WCRI found that case-shifting to workers comp was more likely in states where more workers were covered by capitated group health plans.

“In a state where at least 22% of workers had capitated group health plans, the odds of a soft-tissue case being called work-related were 31% higher if the patient was covered by such a plan compared with similar workers covered by fee-for-service group health plans,” according to the study. “When capitated plans were more common, providers were more aware of the financial incentives that they were presented when treating a capitated patient for a soft tissue condition.”

As an example, 26% of Michigan patients were covered by capitated plans in 2010, the study says. “If 56% of all Michigan patients became covered by capitated plans, we would expect a 9.2% increase in the number of soft-tissue conditions claims paid by workers compensation — equivalent to a 3.4% increase ($21 million) in workers compensation benefit payments,” according to the study.

In a statement Tuesday, WCRI said “the study can be extrapolated to different states — for example, the study predicts about a $100 million increase in workers compensation costs in a state like Illinois if the share of capitated patients rises from 12% to 42%.”

In Illinois, 12% of patients were covered by capitated plans in 2010. If 42% of patients became covered by such plans, a 13% increase in the number of soft tissue claims paid for by workers comp would be expected, the study says.

“By contrast, in states where capitation was less common, there was no case-shifting seen,” according to the study. “This is more than just the result of having fewer capitated patients seeking care. It also appears that when capitation was infrequent, the providers were less aware of the financial incentives.”

“The question we are addressing in this study is to what extent do the financial incentives facing providers and their health care organizations that arise out of capitation (given that workers' compensation pays fee for service) influence whether or not a case is deemed to be work-related,” WCRI President and CEO Dr. Richard Victor said in the statement.

The amount of cost-shifting to workers comp will likely be even higher as the study didn't look at the impact of patients having larger deductibles and copayments in their group health plans, WCRI said.