2015 Workers’ Compensation Research Institute Conference: Perverse Effects of Low Fee Schedules

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Workers Comp Matters: 2015 Workers’ Compensation Research Institute Conference: Perverse Effects of Low Fee Schedules – 5/29/2015

Advertiser: This is Workers Comp Matters, hosted by attorney Alan S. Pierce. The only Legal Talk Network program that focuses entirely on the people and the law in workers compensation cases. Nationally recognized trial attorney, expert and author, Alan S. Pierce is a leader, committed to making a difference when workers comp matters.

Alan Pierce: Welcome to the Legal Talk Network and our show, Workers Comp Matters. This is your host, Alan Pierce, I am an attorney with the law firm of Pierce Pierce & Napolitano in Salem, Massachusetts. Our practice focuses on the representation of injured workers before the Department of Industrial Accidents. Before we get started, we would like to thank our sponsors, Case Pacer, practice management software dedicated to the busy trial attorney. To learn more, go to CasePacer.com. And also PINow; find a local private investigator anywhere in the United States. Visit PINow.com to learn more. This edition of Workers Comp Matters is being brought to you by the Annual Issues and Research Conference of the Workers Compensation Research Institute. And my guest today is Dr. Rebecca Yang. Dr. Yang is a senior public policy analyst at the WCRI. She is one of the lead authors of Compscope. It studies the benchmark of performance of state workers’ compensation systems. She has co-authored numerous studies that examine the prices paid for medical services in workers’ compensation across the states, including the medical price index and various other cost indices. She conducts research on the effect of fee schedule reforms in particular states such as the study that monitors the effect of the 2011 Illinois fee schedule reduction, and a study that estimates the effect of California’s recent fee schedule changes. She is a lead technical expert for Compscope and she received her PhD from the University of Texas at Dallas. Dr. Yang, thank you for joining us on Workers Comp Matters.

Dr. Rebecca Yang: Thank you for having me.

Alan Pierce: Now your presentation today and your research paper was entitled, The Perverse effects of Low Fee Schedules. So let’s talk first and foremost about what are fee schedules, whether they be high or low fee schedules.

Dr. Rebecca Yang: That’s a good starting point. So when thinking about fee schedules, we’re thinking about those practical with the maximum allowable reimbursement rates that states show to regulate their workers comp payments for medical providers. So consensual question is what is a low fee schedule or a high fee schedule or how low is too low or how high is too high. So the framework we’re using to think about this question is to compare the workers comp fee schedule rates with the prices paid by other larger payers. For example, the commercial insurance Group House payers and Medicare payers. Because those are typically the largest payers in a given state. So in the decision making process of a medical provider, we think they are going to compare the prices paid by workers comp payers with the price it is that they’re going to receive by treating other patients. So if the workers comp prices is too low, lower than the prices paid by the Group House that were on Medicare level, then treating an injured worker will become an economical for the providers. Therefore, that may trigger an access to care concern. On the other hand, if the prices paid by workers comp payers being significantly higher than the prices paid by treating other patients, then the policy intention for containing medical costs may be minimized.

Alan Pierce: You’ve actually hit on a subject that really hits a nerve with me and my colleagues in Massachusetts, because Massachusetts has for many years – perhaps as long as we’ve had workers compensation – we have had fee schedules. And everybody acknowledges. I don’t think there’s a single person that is involved in the workers comp system in Massachusetts who will argue that the fee schedule is too high. I think universally, at least here, everybody thinks that the fee schedule is too low. And as a result, the legislature allows the doctor or the medical vendor to negotiate with the carrier. But whenever I see a topic that deals with fee schedules, it’s always of interest to me because one of the chief problems I have is finding – as you’ve used the term – access to medical care. We have a problem, especially in different pockets of Massachusetts where some doctors just plain flat out will not accept a Workers Compensation claimant. Has that been the experience that you have found in other jurisdictions in other fee schedules that may be too low are driving practitioners out of the field of treating injured workers?

Dr. Rebecca Yang: Let me give you an example from one of the earlier studies that may answer your question. So in some jurisdictions, we do observe that happening. For example, before the 2003 reforms in Florida, back then they were having one of the lowest fee schedules in the nation for primary care physicians and surgeons. And because we also have the Worker Outcome Survey data back then in Florida, we do observe Florida having some of the access to care issues reported by their injured workers. So therefore in that particular case, we do have it allies both sides seeing a low fee schedule currently with an access to care issue. As to Massachusetts as of now, I do not have the Worker Outcome Survey Data for this state, so we will have to collect that data too.

Alan Pierce: And I don’t know if this is something that is capable of being collected in terms of data, but just anecdotally and just for my practice, could one make a proposition that doctors, physicians or medical providers that will accept the lower fee schedule might tend to be the less qualified? In other words, certainly here in Boston, we are known as the hub of the medical universe. We have some great teaching hospitals here in Boston and as a result, their fee schedules would tend to be higher than even the outlying towns in Massachusetts. Could one make a case that having lower fee schedules might mean a lower quality of care so somebody could get the access to that care?

Dr. Rebecca Yang: Right, so this is an important question and people can always hypothesize one way or another. But as a researcher and as being with WCRI, we tend now to speculate without having a very accurate datapoint. So part of our Workers Outcome Survey does cover the satisfaction level of injured workers regarding the type of care that they receive. So I think that once we have updated data on that survey, we should be able to reevaluate that question.

Alan Pierce: And that really brings up an interesting point that unlike, for example, the model of Medicare or Medicaid or Group Health insurance or HMOs where the provider pays the charge for the visit, the test of the surgery, workers comp has other facets to it. Because a worker who is availing herself of medical care is generally losing time from work. And the same insurance company is paying for that. And it would seem logical that the quicker there is an improvement or maximum medical improvement or a return to work, the medical costs might pale in comparison to the other costs of indemnity benefits, with the disability benefits and all the other friction costs that go along with perhaps litigation or being out of work, loss of productivity by the employer, et cetera. So that adds to the complexity of dealing with the prices that doctors and medical vendors are allowed to charge, keeping in mind that there is an equal opposite reaction – if I can maybe get into physics a little bit – that you might save Peter and end up paying Paul.

Dr. Rebecca Yang: Okay, so I think that that is true that the faster return to work and better recovery for injured workers is a better solution for everyone in the workers comp system. Shorter curation of temporary disability and better outcomes. So that’s why I’m representing here – including in today’s presentation – that designing, choosing, a fee schedule level is a very delegated balance. So you cannot choose a fee schedule that’s being too low, therefore, it seems like having a savings on one side, however jeopardizing the access to care. But meanwhile, there’s no evidence to show that having a really high fee schedule, the one being significantly higher than the level of Group House prices or Medicare prices that will guarantee you have a better quality care in the state as well. And if the fee schedule level is being too high, then you would on the other hand, have a problem about medical cost containment. So it’s a very tricky balance that the policy makers and stakeholders need to keep in mind and need to strike in the practice.

Alan Pierce: And probably to suggest an analogy or metaphor that I understand, this is sort of like Goldilocks and the Three Bears. Either the bed is too hard or the bed is too soft. I think the central question is how do we know when the bed is just right. It was easy for her to just try them out. So let’s talk about fee schedules because that is the rate that any given office visit, MRI xray, surgical, post-surgical treatment, there would be a code or rate with that code in a payment that patches that, correct?

Dr. Rebecca Yang: Yeah, as in studies, correct.

Alan Pierce: I know it varies from state to state, do you use what Medicare pays, what Masshealth or Medicaid would pay? I see usual and customary charges, whatever that means. I don’t know if that means what the market will bear, but is there a gold standard from which you then deviate high or low from? Is it the Medicare rate reimbursement or something else?

Dr. Rebecca Yang: I don’t think there’s a gold standard per say. Because state have very different choices about how they want to base their fee schedule on. Some states base on Medicare, some states base on customary charges. So given that, there’s no gold standard said. We also published a study looking at the comparison between the workers comp and the Group House prices, saying that the Group House prices may be a new benchmark in terms of ways to thinking about the workers comp fee schedule levels. Because the logic for that is that is the market price for a large payer and that is how the providers think about whether treating injured workers or not in their mind. Therefore using that information as a benchmark when considering workers comp fee schedule might be having some of the advantages for them.

Alan Pierce: And I think this might be a good time to stress that WCRI, the Workers Comp Research Institute, is not an advocacy company or group. You basically study all sorts of issues relating in terms of medical and fee schedules as well as a whole wide host. You don’t take positions, you collect data, interpret that data, and you report, and you report it yearly at a conference such as where we’re at today in Boston. Is that correct?

Dr. Rebecca Yang: That’s right. We are an independent and non-profit organization. We report the data and we publish the results on a wide variety of topics. We do not take positions and neither do we make recommendations. So we’re purely doing objective credible research in the workers comp arena.

Alan Pierce: And I think at this point we will take a short break from our discussion and we will return with Dr. Rebecca Yang in a few moments after a short break, so we’ll be right back.

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Alan Pierce: Welcome back to today’s edition of Workers Comp Matters, where I’m speaking with Dr. Rebecca Yang. She has presented a paper and the results of a study here at the Workers Comp Research Institute Annual Issues and Research Conference titled, The Perverse Effects of Low Fee Schedules. The word “perverse” grabbed me as soon as I saw it. I’m going to make the assumption that lower fee schedules don’t necessarily correlate to either better care or lower costs. So could you tell us what you meant by the rather emotionally charged word, “perverse”?

Dr. Rebecca Yang: So what we meant here is that we observe some adverse effect when a state having a fee schedule that’s relatively lower or if you will, on the low side, compared to the other payers price levels in the state. And when a state reduces the fee schedule rates or a price level, we often observe some unintended consequences in terms of providers changing their behavior to raise revenue. So by the word “perverse,” I think we actually meant adverse effect and unintended consequences.

Alan Pierce: So if I could put that into terms that I might understand or might actually have seen, a provider who perhaps gets less than what he or she wants for a particular procedure might either add additional codes to the procedure or prescribe additional treatment that otherwise that provider might not have provided to make up for the shortfall. I don’t want to, again, put words in your mouth, but is there perhaps a more analytical way of determining what I’ve just described? Because I think we’ve all seen it in our practice.

Dr. Rebecca Yang: Here’s some examples. So say in state with a rate of lower fee schedules, we often see that providers will increase the percentage of office visit codes that’s viewed as more complex codes, therefore more expensive codes. That’s one way we observe they return their revenue for office visits. Also, we saw that in the states with lower fee schedule rates, they tend to have more prevalent physician dispensing at the physician’s office. That’s another way to have more revenue from office visits. Also examples from studies show that when prices were reduced because of fee schedule reforms, often you start to see providers start to change their behavior in terms of billing behavior or treatment behavior to increase the revenue. I’ll give you an example here. So in 2003, Florida had this fee schedule reform that significantly reduced the prices to pay for physical medicine services at hospital outpatient sitting. And what happened after that is we see that the Florida hospitals reduced the physical medicine services provided significantly. So if you look at the percent of the claims that are receiving or percent of the injured workers that are receiving their physical medicine services from hospital outpatient departments after the fee schedule reduction, that increase from 2003 to 2012 continues and is totalled at 10% in points. So that’s that kind of a behavior for changing a treatment patent and changing a billing behavior that we’re talking about here.

Alan Pierce: In fact, I’m going to bring up a scenario that to me, as a lawyer who represents injured workers, sees frequently enough that it’s a concern, and I’m going to ask you whether this is something that you’ve seen or that you’re able to even capture. And that is when the provider has a choice of determining or rendering an opinion of whether – let’s say a knee injury that my client is suffering from is due to years of work or is due to the natural progression of the aging process. And by going with the latter, the bills will be covered by general health insurance or Medicare by going with the work, covered by workers comp, under two different fee schedules. I have run into more than one occasion where my providers are telling my client, who’s reporting that the knee is hurting because of work, that this is not a work-related condition and is a condition that he’s going to bill the HMO or the health insurer or Medicare. So that from the get go, my client may not even be able to get into the workers comp system. Have you found or can you at least track that type of behavior in that nebulous gray area of the legal causation of an injury? There’s medical causation and there’s legal causation.

Dr. Rebecca Yang: Okay, I think you are talking about cost shifting and compensability.

Alan Pierce: Cost shifting or claim shifting, yes, correct. Do fee schedules impact that, I guess that’s my question.

Dr. Rebecca Yang: Right. So in terms of do we have a direct study that’s showing do fee schedules directly impact that kind of behavior. I’m not aware of one right now, but I think at an earlier session today, kind of touched on that topic about the cost shifting. That is there are literatures out there documenting behaviors like this. The condition is when there is a workers comp fee schedule that’s lower than the HMO plans or other Group House plans, then there might be incentive for providers to – especially for soft tissue injuries – to recognize that injury more as accumulative than worker related. I think there is some literature out there that documents that. And also the opposite may also happen. So if in the states that’s where the workers comp prices fee schedules are much higher than the Group House plan, one might wonder whether there’s incentive for providers to recognize a soft tissue or cumulative injuries more likely to be work related than the cumulative nature by itself. So the earlier session at the conference today, Dr. Victor from our institute presented results from a new study that’s looking at the Affordable Care Act that’s comparing the plan based upon the Affordable Care Act versus the workers comp fee for service. And then one of the findings I think is there is a likelihood for the states using the Captive Plan, if you will. Commonly, that may be there is a tendency that they may observe the cost shifting from the Captive Plan to the workers comp plan which is the fee for service plan.

Alan Pierce: Yeah, and I think the point Dr. Victor was making in his presentation that the Affordable Care Act, otherwise known as Obama Care, we’ve all been waiting to see what effect that would have on workers comp in general and in specifically access to medical care. And I think that the point Dr. Victor was making in his study is that the Affordable Care Act might lead to a higher number of patients whose visits will be compensated on a capitation basis as opposed to a fee per service basis. So it could be more profitable for the doctor to make this a workers comp case than a case captive case.

Dr. Rebecca Yang: Yes.

Alan Pierce: So the perverse effect is far reaching, I think one would normally think lower fee schedules then correlate to lower fee costs, but I think what you’re demonstrating is the perversity of that is it leads to recapturing those costs in other fashions, correct?

Dr. Rebecca Yang: In a sense, yeah.

Alan Pierce: How about high fee schedules? Is there any type of perverse effect there except maybe driving more and more people to more and more doctors to treat?

Dr. Rebecca Yang: I think the perverse in a sense, we’re thinking what was the policy intention to begin with. So an important policy intention for any type of fee schedules I think is to contain the medical costs. Meanwhile, to ensure the injured workers access to care. So anything deviate from the original initial policy intention, I think we can call an adverse effect or perverse effect. So for the high fee schedule, I think that’s directly having an adverse effect on containing the medical costs. Because if the fee schedule rates for workers comp being so high that it’ significantly higher than any other larger payers paying for the same service in the states, then one may wonder the policy goal for containing medical costs in the workers comp system whether that’s been minimized or not.

Alan Pierce: I’m going to ask you a question that I just don’t know the answer to and I don’t know if it’s something that you are aware of and if so, how do you study it. I mentioned earlier that Massachusetts has a fee schedule generally considered to be on the low side, but it has the ability to have the doctor or hospital negotiate a higher fee. Is that the exception, is that the minority view in other states? Can you speak on that at all?

Dr. Rebecca Yang: Different states have different regulations on that, Massachusetts being one of those that allow people to negotiate about fee schedules with them. Other states also have that happen in the practice. But in some other states, they have very restrictive rules saying the fee schedule maximum allowable rates need to be the ceiling. Therefore, you cannot negotiate above. So it really depends on which jurisdiction’s choice about their regulation.

Alan Pierce: Are you able to draw any conclusions or would you be able to share those conclusions as to whether having the ability for having the parties to negotiate on an individual basis might get us closer to that comfortable bed balancing access to care and fair price and good treatment for the patient?

Dr. Rebecca Yang: I don’t think I can really say that is the key to the complicated issue, but what we observed is once in a state that has a reputably lower fee schedule, and in a state that’s freezing the fee schedule for a long time, therefore the prices reflect in the fee schedules and is detached from the market practice, if you will, then negotiations tend to happen more frequently and tend to happen in the larger degree.

Alan Pierce: Do you find the states that have the most positive satisfaction among all the stakeholders and states that allow negotiation or is it impossible to draw that conclusion?

Dr. Rebecca Yang: I think it’s nearly impossible for me to draw that conclusion because all the different parties have very different agendas and their measures for satisfactions here.

Alan Pierce: Can you point to any state or particular model that could be replicated by other states or again, are there too many variables?

Dr. Rebecca Yang: Well, I think each state pretty much face a unique set of variables here, so it’s very hard for me to say this will be the good model for every state that would work. Some states tend to have very different political environments-

Alan Pierce: I was just going to bring up the P word. It all comes down to politics, doesn’t it at the end of the day?

Dr. Rebecca Yang: And different history about how things have evolved over time and different strengths between parties, so it’s very hard to say. And sometimes geographic difference and-

Alan Pierce: Economic differences of the state.

Dr. Rebecca Yang: Exactly, exactly, industries. Those all play a big part in this complicated play out here, so I can not really say which one is the good model here.

Alan Pierce: Well, Dr. Rebecca Yang, I’d like to thank you for being a guest today on Workers Comp Matters. I want to thank you for the research you’ve done in the past and the research in the presentation you’ve presented today.

Dr. Rebecca Yang: Thank you.

Alan Pierce: If anybody wants to learn more about WCRI, Dr. Yang’s study or any of the other studies that were presented, you can contact the Workers Comp Research Institute in Cambridge. And for Workers Comp Matters, this is Alan Pierce. I hope you go out and make it a day that matters. Goodbye.

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