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California workers comp medical payments down

Posted On: Aug. 19, 2015 12:00 AM CST

Industrywide medical payments in California's workers compensation system declined by $100 million, or 3.7%, to $2.5 billion in 2014 from 2013, according to a report published by the Workers' Compensation Insurance Rating Bureau of California.

“California Workers' Compensation Aggregate Medical Payment Trends,” published Tuesday, demonstrates the effect of S.B. 863, as California's workers comp reform law is commonly known.

One of the S.B. 863 reforms was a new physician fee schedule centered on the resource-based relative value scale used in the Medicare physician fee schedule, which increased payments to general practitioners but lowered payments to specialists such as surgeons and radiologists.

The adoption of the new fee schedule in January 2014 was a factor in the medical payment savings, as the schedule covered about 41% of all costs, or $1 billion per year, according to the report. Specialist-driven categories declined to 18.5% in 2014 from 20.9% of payments in 2013, while primary care payments increased to 19.5% in 2014 from 16.7% in 2013, the report found.

Other services unaffected by the new fee schedule also experienced declines, including inpatient and outpatient payments and medical supply payments, according to the report. For example, the share of payments to inpatient and outpatient hospital facilities declined to 18.5% in 2014 from 22.4% in 2013 amid a general pattern of declining hospital utilization.

Total pharmaceutical payments experienced a 1.6% decline in share in 2014, with the share of opiates as a proportion of all pharmacy spending dropping to 27% in 2014 from 31% in 2013. However, the cost per drug transaction increased, largely driven by the frequent use of brand-name rather than generic drugs, the report found. The cost per prescription for branded drugs was about four times higher than for generic equivalents, and brand-name drugs, excluding opiates, represented roughly 40% of all pharmacy spending.

Partly offsetting the overall payment decline were increased medical legal and lien costs, according to the report. Medical legal reports generated more than 10% of workers comp medical payments in 2014, a 1.4% increase over the prior year.

“The increase in lien payments may in large part be due to improved reporting of this information rather than an actual increase in lien payments,” the report stated.

Bureau researchers used reported medical payment data representing more than 90% of the California workers comp insurance market in compiling the report.