Cost Analysis of Current RBRVS Fee Schedule Proposal

Total allowable fees for physician services in the California workers’ compensation system could increase by an estimated $250 million during the 4-year transition to a new Resource-Based Relative Value Scale (RBRVS) physician fee schedule that begins next year according to a CWCI review of data prepared by RAND.

RAND’s analysis of changes in California workers’ compensation medical payments under the proposed RBRVS-based physician fee schedule, prepared at the request of the DWC, estimates that by 2017, total allowable workers’ compensation physician fees will be $104.37 million more than under the current schedule — an increase of 11.9%. But the proposed RBRVS fee schedule will be phased in over 4 years, beginning in 2014, and the additional $104.37 million in allowable fees estimated by RAND represents the increase for 2017 alone.

CWCI Claims and Medical Director Brenda Ramirez analyzed the proposed fee schedule changes using the total allowable fee data from the latest version of RAND’s working paper to calculate the additional allowable fees (increases) for each of the 4 transition years (2014-2017). The results are noted below. Based on the calculations in the RAND analysis, CWCI estimates that the total allowable physician fees over the 4-year transition to the proposed RBRVS-based fee schedule will increase by $250.23 million.

What happens beyond 2017? Assuming no change in utilization of workers’ compensation physician services, total allowable fees for 2018 and subsequent years will be the same as in 2017: $104.37 million more than under the current schedule, plus any increase due to the annual adjustment factor, which under state law [LC §5307.1(g)(iii)], is based on the change in the Medicare Economic Index and Medicare’s relative value scale adjustment factor. Medicare’s update factors, however, are different, and have been lower than those used in the DWC’s proposed schedule. If Medicare’s update factors continue to be lower than the DWC’s, over time there will be a compounding effect and the total allowable fees for workers’ compensation physician services will become an increasingly higher multiple of the total allowable fees for those same services under Medicare.

Although state law [LC §5307.1(b)] allows the DWC to adopt conversion factors and other factors affecting physician payments that are different from those used by Medicare, it may only do so if the estimated aggregate fees do not exceed 120% of the estimated aggregate fees payable by Medicare for the same class of services. Unless this section of the law is applied in the physician fee schedule regulations adopted by the DWC, the compounding effect will drive up allowable physician fees beyond the 120% cap and undermine reform savings intended to pay for increased disability benefits for injured employees.

Last Friday the DWC issued a 15-day notice of modification to proposed physician fee schedule regulations. The Institute is preparing written comments on the proposed modifications, which are due by 5 p.m. on Monday, August 19, so if you have input on the modifications, please send your comments to Brenda Ramirez (bramirez@cwci.org) as soon as possible. Text of the proposed amendments to the physician fee schedule and related documents are posted in the Regulations section of the CWCI website, www.cwci.org/regulatory.html.

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