Fee Schedules Stabilized Tennessee Workers’ Compensation Costs

Average medical costs per workers’ compensation claim in Tennessee stabilized at pre-fee schedule levels after the state introduced medical fee schedules in 2005, according to a new study.

According to the report by the Workers Compensation Research Institute (WCRI), the stabilization came in the form of fairly flat payments per claim to physicians and physical/occupational therapists and payments to hospital providers that were lower than the amounts paid before the introduction of the fee schedules.

Despite the fact that Tennessee implemented a professional services fee schedule that was relatively higher compared to other study states, prices paid to nonhospital providers continued to fall or changed little compared to the period before the introduction of the fee schedule, according to the study.

For example, prices paid for major surgery (shoulder, knee, back, wrist surgery) and physical medicine fell in 2007/2008 (4 and 3 percent respectively), prices paid for minor radiology (X rays) changed little (2 percent), prices paid for major radiology (MRIs) and office visits grew (5 and 6 percent respectively), but these changes generally tracked Medicare increases in 2007.

The study looked at 2007/2008 claims with greater than seven days of lost time and 12 months of experience.

Researchers said that introducing fee schedule rates that were lower (surgery, radiology) or higher (mainly office visits) than average prices paid may have created incentives for providers to increase or decrease the use of medical services. However, monitoring the trends in nonhospital utilization in Tennessee, they found no significant changes in the use of medical services after the reforms.

The study reported that starting in 2005, fewer workers received physical medicine services provided by hospitals after a 27 percent decrease in the average payment per such service from 2004/2005 to 2007/2008 due to the fee schedule regulations.

Meanwhile, more claims had physical medicine services billed by physical/occupational therapists, physicians or chiropractors in 2004/2005 to 2007/2008. This result might be related to the fact that nonhospital prices paid for physical medicine were lower or closer to the new schedule rates than hospital outpatient payments per service, according to the study.

Despite the decrease in frequency of use of hospital outpatient physical medicine in Tennessee, visits per claim changed little over the analysis period. This may suggest that injured workers treated with physical medicine in a hospital outpatient setting received the care they needed.

The study also found that the introduction of professional services and outpatient fee schedules in 2005 had a significant impact on hospital outpatient payments per claim in Tennessee, which shifted from being typical of study states before the implementation of the fee schedule to lower.

The study noted that payments per service for many services decreased: office visits decreased 4 percent; major radiology (MRIs) decreased 7 percent; minor radiology (X rays) decreased 17 percent; and physical medicine decreased 3 percent.

Only payments per service delivered at an operating, treatment, or recovery room grew 14 percent in the 2006/2007 to 2007/2008 period.

The study also reported that hospital outpatient services per claim also decreased during 2004/2005 to 2007/2008, likely the result of the large decreases in hospital outpatient payments per service.

A combination of fewer visits per claim and services per visit led to a significant decrease in the overall number of services per claim in a hospital outpatient setting, which decreased from 21 services per claim in 2004/2005 to 14 in 2007/2008.

The Workers Compensation Research Institute is a nonpartisan, not-for-profit organization that conducts public policy research on workers’ compensation.

Source: Monitoring the Impact of Regulatory Changes in Tennessee: CompScope Medical Benchmarks, 10^th Edition. WCRI