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Health care reform may drive workers comp costs higher

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BOSTON — Federal health care reform is expected to encourage the development of flat-fee, or capitated, health plans, which could shift medical costs for workplace injuries from group health plans to workers compensation, according to preliminary research from the Workers Compensation Research Institute.

Group health plans with capitation arrangements, such as health maintenance organizations, pay medical providers a set annual fee per plan member, regardless of visits. That differs from fee-per-service plans, which pay providers for each procedure or visit.

WCRI Executive Director Richard Victor said workers comp plans pay providers in addition to the fees they receive under capitated plans, since the flat-fee plans don't cover work-related injuries. But for injuries that don't qualify for workers comp, provider payments are limited to the capitated group health plan payment.

Tentative data from WCRI shows capitation encourages providers to seek workers comp payments in addition to capitated health plan fees, Mr. Victor said during WCRI's annual conference March 5-6 in Boston.

Accountable care organizations — networks of doctors and hospitals established under federal health care reform to improve patient care while lowering health care costs — are shifting toward capitation payment, Mr. Victor said. Therefore, he said providers in ACOs may have an incentive to shift patient claims to workers comp plans that pay more for certain conditions, such as soft-tissue injuries.

That trend could increase as more ACOs come into existence, he said.

“If it's work-related, then the provider gets the same fee for service as what's paid by workers comp,” he said. “If it's not work-related, the provider's already been prepaid for any care that they give. Potentially, that's a pretty powerful incentive. If I call it "X,' I get paid. If I call it "Y,' I don't” get any additional payment.

Employers in states without workers compensation medical fee schedules tend to spend more on medical management services and litigation to control claim costs, according to separate research by Cambridge, Massachusetts-based WCRI.

While defense attorneys and medical management services can limit workers comp indemnity and medical claim costs, employers should consider where the expenses for such services are outweighing claim savings, said Carol Telles, a senior analyst at WCRI.

“Increased use of medical management may help reduce medical costs or cost growth, but there are costs associated with doing that, and those costs have to be considered,” Ms. Telles said.

She highlighted medical management costs in New Jersey, which does not have a workers comp medical fee schedule and does not require medical cost containment tools, such as utilization review or medical treatment guidelines.

New Jersey saw increased use of medical provider networks for workers comp in 2011, which resulted in a leveling of medical costs in 2012 and 2013, Ms. Telles said. However, medical management costs rose from 21% of New Jersey's workers comp medical costs in 2011 to 23% in 2013, the most recent year studied.

Employers also are prone to pay more litigation costs in states with complex workers comp dispute resolution processes or where it is difficult to appeal comp medical opinions, such as California, Louisiana and Georgia, WCRI data shows.

“In a state with a more complex resolution system, probably what we're looking at (is) more defense hours billed,” Ms. Telles said. “So that translates into higher defense attorney payments and may be associated also with higher legal expenses.”

Yet another WCRI report showed that states with workers comp medical fee schedules that are priced too low may encourage providers to bill for more visits or costlier procedures than providers in states with higher reimbursement rates.

Rebecca Yang, senior public policy analyst at WCRI, said California, Florida, Massachusetts, New York and North Carolina have fee schedules that are near or below Medicare reimbursement rates. Such states are prone to seeing an increase in workers comp claim cost drivers, such as physician dispensing of costly medications or billing for expensive procedures.

“We often see there (is) more frequent billing of more complex office visits in those states,” Ms. Yang said of states with low fee schedule pricing.