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Higher state fee schedules can drive patients into workers comp system

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Injuries that are tricky to diagnose as work-related are more likely to be classified as workers compensation cases in states where fee schedules are higher, according to the Workers Compensation Research Institute.

In findings released April 14 by Cambridge, Massachusetts-based WCRI, it was estimated that increasing workers comp reimbursement rates by 20% for physician services provided during office visits caused soft tissue injuries, such as a sore back, to be classified as work-related 6% more often.

The fees schedules are generally more favorable than what insurance rates pay, and in workers comp cases, there are no deductibles or co-pays for the patient to pay, said Michael Gavin, Duluth, Georgia-based president of medical cost management company Prium. And when there is a gray area, he said people generally respond to financial incentives. “The doctor gets paid more, and the patient doesn't take out his wallet, so everyone wins,” Mr. Gavin said.

Injuries where the cause is more obvious, such as broken bones or lacerations, did not show the same trend of case-shifting from group health to workers comp, WCRI said.

Fee schedules vary widely from state to state, WCRI said in the report. In many states, workers comp pays higher prices than group health.

As of July 2011, California, Massachusetts, Florida, North Carolina, New York and Hawaii had workers comp fee schedules with rates within 15% of Medicare rates. Oregon, Delaware, Idaho, Illinois and Arkansas had workers comp fee schedules that were over twice what Medicare rates were.

The financial implications when totaled are significant, the report said. For example, in a large state like California, if only 1% of group health cases with soft tissue conditions are shifted to workers comp, costs would increase over $80 million. Even in the small state of Iowa, workers comp costs would increase by $9 million, the report said.

The cause of an injury is decided by the treating physician, and treating physicians get paid on a fee-for-service basis or a salary. When physicians are paid on a fee-for-service basis, they receive the amount that state workers comp fee schedules dictate. The study alludes to doctors deciding to classify an injury as work-related for financial gain if it is something that is hard to determine the cause, such as a back injury or other soft tissue injury.

Joe Paduda, principal of Madison, Connecticut-based Health Strategy Associates L.L.C., said he does not believe that doctors are shifting cases to workers comp for the financial benefits.

“I don't see the motivation for a doctor to classifying the case as workers comp. The hassle of dealing with workers compensation is exponentially greater than working with group health,” he said. “Doctors are incentivized by stripping out all of the extraneous non-care work.”

Mr. Paduda also suggests that in states where fee schedules are lower, it could be that a lot of cases that should be workers comp are being paid under group health plans because the doctors “just don't want to deal with workers comp.”

The WCRI report was based on workers compensation and group health medical data from 2006-2010. In the future, WCRI said it plans to research other areas involving case-shifting, including workers comp research involving lower and middle income workers and the provision of insurance through private exchanges to previously uninsured workers.