The California Workers’ Compensation Institute has issued the final installment in a six-part research series tracking medical costs and utilization following implementation of fee schedules, utilization review, and other workers’ compensation medical cost containment strategies included in the 2002–2004 legislative reforms.

The latest study, released this week, found that after accounting for all fee schedule changes included in the 2002 workers’ compensation reform bill and subsequent regulations, the average amount allowed for an inpatient hospital admission in California workers’ compensation fell to $14,439 following the June 2004 fee schedule revision – down 4.6 percent from the 2003 level, but 0.8 percent above the average allowable for 2002. The first five reports in the series focused on other medical utilization and cost reforms. Key findings from those studies included:

Part 1. Outpatient Surgery Fee Schedule

• Average outpatient surgery facility fee payments fell 38.9% from the 2001 level after implementation of a fee schedule in 2004.

Part 2. Physical Therapy and Chiropractic Manipulation Cost and Utilization

• The average number of physical therapy visits at 9 months post injury fell 45.1 percent and the average number of chiropractic manipulation visits fell 55.8 percent following implementation of the 2004 utilization review schedule, ACOEM and the 24-visit caps. As a result, total PT payments per claim at 9 months averaged 47.4 percent less in 2004 than in 2002; while total payments per claim for chiropractic manipulation averaged 60.9 percent less.

Part 3. Physician Services Fee Schedule

• Average fee schedule allowances for physician services fell 4.1 percent between 2003 and 2004.

Part 4. Pharmacy Fee Schedule Changes

• 2004 fee schedule changes were associated with a 9.6 percent reduction in average unit payments for prescription drugs between 2002 and 2004. At the same time, reimbursements for brand name drugs climbed from 57.8 percent of total workers’ compensation prescription drug dollars in 2002 to 70.2 percent in 2004 – a relative increase of 21.5 percent. In 2004, repackaged drugs dispensed through physician offices and not subject to the fee schedule accounted for 30 percent of all California workers’ compensation prescriptions, 43 percent of the pharmacy dollars billed and 51.5 percent of the pharmacy dollars paid. Despite fears that the fee schedule would result in fewer pharmacies filling workers’ compensation prescriptions, injured worker access to pharmacies improved significantly.

Part 5. Changes in Utilization and Reimbursement for Medical Services

• Following the implementation of the 2004 UR schedule, the proportion of indemnity claims receiving chiropractic manipulation, physical therapy and injections declined, while the proportion receiving surgery increased slightly and the proportion involving radiology rose significantly.
• At nine months post injury, the average number of visits and average total payments for chiropractic and physical medicine per indemnity claim dropped sharply in 2004. At the same time, the average number of surgery visits declined by 14.6 percent from the 2003 level, though total surgery dollars paid per claim increased 18.5 percent, suggesting a shift in the mix of surgical services used.

All six of the Institute reports tracking early returns on California workers’ comp medical reforms can be accessed by visiting the Research section of the Institute web site at www.cwci.org.