Workers’ Compensation is primarily designed to provide two benefits: payroll replacement for injured workers and medical payments to providers. But over the years, the process has become increasingly complicated.
Guest Ramona Tanabe is executive vice president and counsel for the Workers’ Compensation Research Institute (WCRI). In this episode, she explains the WCRI’s newly updated report, available now, “Designing Workers’ Compensation Medical Fee Schedules, 2022,” penned by the WCRI’s Olesya Fomenko and Te-Chun Liu.
Medical fee schedules, relative worth or value of medical services, state Workers’ Compensation calculations? Whew. When 50 states have 50 different procedures, it can be hard to follow the numbers.
Tanabe says it’s crucial to know how vastly different state payments are, payment gaps that have appeared, and how fee schedules can affect whether providers will accept a patient covered by Workers’ Comp.
This informative episode explains how rates for patient care are calculated and implemented for clients hurt on the job.
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Intro: Workers’ comp Matters, the podcast dedicated to the laws, the landmark cases, and the people that make up the diverse world of workers’ compensation. Here are your hosts Jud and Alan Pierce.
Alan Pierce: Hello again. Alan Pierce on the Legal Talk Network. Happy to have you join us for another edition of Workers Comp Matters. I’m flying solo today. My co-host and law partner and son Judson Pierce is actually doing some work today. So I’m doing this one alone but I’m very happy to have a returning guest of Ramona Tanabe from the Workers Compensation Research Institute of Cambridge. WCRI is a nonprofit workers’ comp research organization that provides a great deal of interesting material to the workers’ compensation community and Ramona oversaw a project and a report that issued this past June of 2022.
I want to give credit to Olesya Fomenko and Te-Chun Liu who were the primary researchers on this topic and they tackled a very vexing issue in the area of workers’ comp, and that is Workers’ Compensation Medical Fee Schedules, and Ramona’s going to introduce us to that topic and why this is such an interesting and sometimes controversial topic. So having begun that way, Ramona, welcome to workers’ comp matters and thank you for joining us.
Ramona Tanabe: Thank you, Alan, I’m happy to be here.
Alan Pierce: When I first started in workers’ comp many years ago, workers’ comp as a system was much more simple than it is today, and that its essence, workers’ compensation provides two basic benefits, wage replacement benefit known as weekly indemnity or weekly disability checks, and medical payments for treatment for injuries. Back when I started, it was relatively simple. Somebody gets hurt at work and they go to the doctor and they have x-rays or they get a diagnostic test or they do therapy. The doctor submits a bill, the bill is paid, and that’s the end of it. Over the years, most jurisdictions have adopted fee schedules. In other words — well, let’s rather them I say in other words, tell us what medical fee schedules are in the workers’ comp arena.
Ramona Tanabe: Sure. The report that you mentioned, and today we’ll be talking about medical fee schedules for professional services, so things that you think of as an office visit or an x-ray. They’re a way to define what medical providers will be reimbursed for the medical services that they provide to injured workers. It can be a simple list of medical procedures with an amount that will be reimbursed or it can be based on a formula, based on another program such as Medicare. Much of what happens in workers’ comp occurs either in parallel with group health or sometimes after group health.
In the 70s and 80s, there was an interest by Medicare to reimburse for services resulting in the current method that we use to pay. In many states, fee schedules are similarly designed using a scale of relative worth called a relative value of procedures, and then you apply a conversion factor to those relative values to come up with a dollar amount.
Alan Pierce: So somebody has to do some math. Where is that done?
Ramona Tanabe: That’s a very good question. Every state workers’ compensation agency that has a fee schedule creates the basis of the fee schedule and then the calculation of the fee schedule. So it’s provided by the workers’ compensation agencies.
Alan Pierce: And we have 50 individual states. We also have obviously some plans in the federal government of the 50 states. Let’s confine ourselves right now to state-based workers’ comp. Do all 50 states have fee schedules?
Ramona Tanabe: They don’t. 44 of them have fee schedules for professional services as a way to get reimbursed and there are six states then without medical fee schedules.
Alan Pierce: Okay. Let’s talk about those 44 states first. So each state has a department agency, commission that routinely evaluates the cost for services and applies a formula to it.
Ramona Tanabe: Yes, with the caveat that you said routinely evaluates, and that’s up to the state on how frequently they like to do that. So, for example, if a state chooses to use Medicare as the basis for the reimbursement, using what’s called Resource-Based Relative Value Scale or RBRVS within Medicare, and they choose to use the current one that’s applied, then it would automatically adjust as Medicare adjusts its values. There are some states that select a year, for example, Florida uses 2016 Medicare RBRVS. So it’s up to the jurisdiction to decide what’s appropriate for their state and how it’s adjusted.
Alan Pierce: So what this means I guess to my clients that are hurt at work or more importantly to their medical providers, therapists, physicians, et cetera, that medical provider is going to be reimbursed a set amount, not what I guess people refer to as the usual and customary charge. So if a facility charges, let’s say, $750 for a lumbar MRI, the fee schedule might provide a different dollar amount for reimbursement. Did I get that correct?
Ramona Tanabe: That’s correct. So the charge and the reimbursement amount might be two different things. What you mentioned, the reasonable and customary, sometimes that’s called the CPR charge, which is the customary prevailing reasonable charge, or UCR, usual and customary and reasonable charge. That’s what Medicare used to have in place, and the critics of that system say that that it was characterized by an inflationary bias, because it was based on payments of the 75th percentile of the prevailing charge of the area.
Alan Pierce: This all sounds so complicated.
Ramona Tanabe: It is.
Alan Pierce: Would you agree with me that my observation and my colleague’s observation is that, in general, medical fee schedules are generally lower than most medical providers would normally be willing to accept. Is that a fair generalization?
Ramona Tanabe: Not always, I think because one thing you’ll see in the report is that the states are so very different on how they apply a fee schedule, that there are some states where they’re actually quite generous. I think whether they’re less than what they’d like to accept is probably always true, but it might be that that it’s dependent on relative to where the group health is providing reimbursement amounts and where Medicare is a providing reimbursement amounts. So what does the rest of the market doing?
Alan Pierce: Okay. So I guess we have on a broad-brush three categories, we have group health insurance, Medicare and workers’ comp, and obviously, these reimbursement amounts fluctuate as well as they’re different in every state. Why is Medicare used as sort of the baseline from which states will either deviate upward or downward?
Ramona Tanabe: It’s a good question. So what the report shows you to is how each state fee schedule rate compares to that state Medicare rate for the same procedures. So how different is it from the state Medicare rates? Why do they use Medicare? Of the 44 states that have a fee schedule, 37 of them use Medicare as the basis for the reimbursement amount, and the remaining states use some kind of, whether it’s a historical or a current UCR, usual and customary and reasonable amount, or some other method. For example, Alabama has set reimbursement as the preferred provider reimbursement paid by the largest healthcare service plan in 1992, and it’s been adjusted every year since then.
But the reason they use Medicare is because not using some method that requires them to calculate at the state agency. It’s a pretty substantial resource for them to create, develop, and maintain a database of those fees on which to base the rates. So Medicare offers that option of updating to the current RBRVS, the Resource-Based Relative Value Scale.
Alan Pierce: So in other words, the Social Security Administration or CMS or Medicare actually does 95% of the work. They perform these assessments and set rates. One thing I found, something that I didn’t know or maybe I should have known, is that Medicare rate in Massachusetts for a service may not be the same as the Medicare rate in New York for the service, that even though it’s Medicare and the federal government, there are still variation state by state, which seems to make sense. You may have higher medical costs in Massachusetts than you do an Alabama, simply because of the nature of the medical community and the population and demographics. So having said that, and of the states that use Medicare, when they set a worker’s comp rate, do they go so many points above What Medicare? Give us maybe some concrete examples from the low end and to the high, and how this is actually administered. Maybe tie it into a particular type of service.
Ramona Tanabe: So there are many examples on how it’s implemented in the states, and what you’ll see in the report is that they’re all very different. So using the Medicare RVUs is one option and depending on what point in time you choose the Medicare RVUs, whether they’re current or maybe they’re fixed to a point in time in the past, set a different RVU or relative value, and then there are multipliers for different types of services that are used. So some states use a flat fixed percentage of Medicare so they might use 200% of Medicare.
Alan Pierce: In other words, a medical provider can be reimbursed twice as much as what Medicare would reimburse for that MRI.
Ramona Tanabe: That’s correct.
Alan Pierce: Or for a surgical procedure, a rotator cuff repair, if Medicare allows $6,000 for reimbursement, if a state has 200% Medicare, they can charge $12,000.
Ramona Tanabe: Correct. But in some states, it’s not a flat 200% across all services. It might be one percentage multiplier or a conversion factor for emergency services, a different one for radiology and a different one for surgery. Why do they do that? That’s dependent on what the workers’ comp agency determines their needs to be to support the injured workers, because this is all about getting access for those injured workers.
Alan Pierce: Well, is there tension in the rate review process between the insurance industry and the injured workers? I’m assuming the insurance industry would want to keep medical costs on the low side. The injured worker would want to have medical costs set in such a fashion that they can get access and get competent treatment. Where does that tension come in?
Ramona Tanabe: There is a tension and one of the reasons to have a medical fee schedule is for the predictability, predictability both for the payers and for the medical providers, and that stability allows access to the injured worker, because there’s no negotiation or pre-approval or anything that’s required before services are rendered to the injured worker. So it streamlines things a tad bit more. That’s not to say there aren’t other factors that play in, in addition to fee schedules.
Alan Pierce: Okay. Before we take a break, I want to ask you this question. You issued a report, the report as I mentioned at the top of the show, is entitled Designing Workers Compensation Medical Fee Schedules 2022. What was the impetus for WCRI to tackle this particular issue and study this?
Ramona Tanabe: So we first issued that study, a version of that study in 1993, and that was the year after Medicare put in place the RBRVS system that they currently have for reimbursement and we’ve updated it every few years since then. But that’s almost 30 years ago, and as more states adopted fee schedule, we saw the need to kind of put together that information for policymakers, so they understand the choices that might be needed to make when they’re creating or modifying a fee schedule. So we include information about how the fee schedule rates compared to those state Medicare rates in the report, as you said, which are different from jurisdiction to jurisdiction.
Alan Pierce: All right, at this point, we’re going to take a short break and when we come back with Ramona Tanabe, we’re going to get into a little detail in terms of some of the findings that this report made and what this may mean to the payers and the receivers of medical care. So we’ll be right back after a report from our supporters. Thank you.
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Alan Pierce: Welcome back well with Ramona Tanabe, talking about fee schedules. Ramona, we left off with the report that issued in June of 2022. What would you say would be the major finding or findings that emanated from your study across 44 or 50 jurisdictions?
Ramona Tanabe: One of the major findings is how vastly different state fee schedules are, the basis, the amounts that are reimbursed, the multipliers that are used, the conversion factors that are used and how frequently they’re updated. A second major finding would be that there are also gaps in fee schedules. For example, Medicare does not issue relative value units for every single procedure code, and in Medicare, those are simply not reimbursed. Where there’s no RVU, there’s no reimbursement by Medicare. That’s not true in the state workers’ compensation system. So those procedure codes are then covered either by percent of charges or by report or an individual consideration. The amount of those can be very different. Number one, depending on how recently a state modified or updated their fee schedule. The older the fee schedule is, the more recent codes will be in or covered by Medicare RVUs, or what they’ve chose to exclude.
Alan Pierce: Let me pose this question to you. Let’s assume a medical provider is a physical therapy facility and they charge $85 for a — their usual charges $85 for a 45-minute physical therapy session. If a workers’ comp claimant comes in and the next person that comes in is a group health patient, and then somebody comes in that’s a Medicare patient. For the workers’ comp patient when they send out the bill, do they have to do all of these billing calculations and submit it or do they submit the $85 bill to the insurance carrier and the insurance carrier applies a formula and reimburses them a set amount of that $85? Is there any general conclusion?
Ramona Tanabe: The providers would be submitting their regular bills and they’re then reimbursed based on what the payer determines the fee schedule amount to be, or if they happen to be within a network, it might also be negotiated. That’s different in different states, whether the fee schedule acts as a maximum amount reimbursed or whether it’s an amount to be reimbursed that you can negotiate around.
Alan Pierce: And I was going to get to that question as well, because that is a frequent area that we, as attorneys, sometimes are drawn into. So other situations where the fee schedule is so low in a particular jurisdiction that some medical providers just will not accept patients that are covered under workers’ comp because they will not accept the fee schedule.
Ramona Tanabe: We have heard that, yes, and some of it has to do with, like I said, where the fee schedule is relative to the rest of the market compared to Medicare rates and also compared to group health rates.
Alan Pierce: Okay. So you know what you gave us an earlier example when we are talking about the variances in Medicare rates of a jurisdiction that might reimburse at 200% of Medicare, and I think you said there was one, and I was actually surprised, pleasantly surprised to see that at least in one jurisdiction there was a rate that I would consider to be somewhat, I don’t want to use word generous, but certainly not oppressive. How about on the other end of the scale? What do we find out there across the country in terms of Medicare, I’m sorry, workers’ comp reimbursements that are below what Medicare pays? What are the ranges there?
Ramona Tanabe: So there are some states where many of the services that are provided, medical services that are provided, are at or slightly lower than Medicare rates. Most of the time, they don’t get very much below the Medicare rates, but there are some states that are very similar to Medicare rates.
Alan Pierce: Okay. Now, you mentioned negotiation. Well, first of all, two questions before I get into negotiation. If an insurer only reimburses a certain amount of the charged rate submitted by the provider, can that provider balance bill the injured worker the difference between what they expect to be paid and what workers’ comp reimburses them?
Ramona Tanabe: No, balance billing is not allowed in workers’ compensation.
Alan Pierce: Okay. So I own a physical therapy facility and workers’ comp reimburses maybe a few percentage points less than Medicare and I can’t afford to run my facility doing that. Can I as a provider refuse to take a worker’s comp claim, because I don’t like the fee schedule?
Ramona Tanabe: Some of that depends on if you’re in a network that’s also part of the workers’ compensation network. So it really depends on the individual relationships with the providers and the payers.
Alan Pierce: Again, just to use Massachusetts for an example, because I think we’re somewhat typical perhaps on the low side across the country. Our statute indicates that all fees for services must be paid in accordance with the rates established by the particular commissioner agency that does that. It does however say two things. It says the injured worker cannot be required to pay the difference, and secondly, it says that the provider and the insurer may negotiate a higher rate than the fee schedule allows. Do you find that to be a common provision across the country?
Ramona Tanabe: It varies. I can’t answer the question of how much it varies, but I don’t think it’s unusual. It’s probably more likely in states where they have lower reimbursement rates.
Alan Pierce: Yeah. I think Massachusetts at least anecdotally has always been considered to be in the low side of reimbursement, so that as I mentioned, I frequently get drawn into matters when my client says, I’ve been waiting for approval for my rotator cuff surgery and my doctor says the insurance company is not offering enough, and if I get involved, I find that the insurer is willing to pay the rate of $6,200 for the surgery. The bill charge is $15,000, but the doctor is willing to accept $12,000, and they’ve negotiated but can’t come to a number. At that point, if they cannot agree, my client’s choice is usually to find another surgeon that will do it, or I’ve seen situations where it’s been shifted over to perhaps Medicare or some other provider that will pay a higher rate. That’s been a problem. Did your study revealed that to be a problem in terms of medical access?
Ramona Tanabe: I think the question of medical access is always a consideration by policy makers when they’re implementing fee schedules. We did a different study a number of years ago that compared workers’ compensation rates compared to group health rates, because if they’re operating within that whole market, if they’re very similar, then you’re likely not to have access issues. However, if they’re very disparate, they’re less likely to — if workers’ comp is lower, they’re less likely to take workers’ comp patients than they are to take group health patients or even Medicare reimbursement amounts.
Alan Pierce: One of the takeaways I was able to get from your report is that there is not necessarily a correlation between states that have low reimbursement rates in their fee schedules and low overall medical costs. So could you perhaps address that? Is that one of your findings, and if so, how surprising is that?
Ramona Tanabe: It’s true. Remember that the fee schedule sets the prices for medical services, so the price is one component of cost. It’s also dependent on, the overall cost is also dependent on the utilization, how many services are provided, how many different types of services are provided. So all of that together equal the cost, medical costs of the claim.
Alan Pierce: So can you make any type of general statement? Is there sort of a — I guess maybe is there a sort of magic number that seems to work best?
Ramona Tanabe: I wish I could give you that but there isn’t one. I can tell you that, when you look at our study you can see that on the lower end of reimbursement rates, very similar to the state Medicare rate would be Florida and Massachusetts, and when we’ve looked at those two states in other studies on access to care, Massachusetts does not appear to have an access to care issue for injured workers, and Florida, it’s more difficult for workers to see the provider that they wanted to see within the timeframe that they wanted to see it, and also to see specialists.
Alan Pierce: Does your report consider the other costs of having low reimbursement rates that manifest themselves in higher costs in the workers’ compensation claim in general? For example, if you can argue that the better physician, the better surgeon might mean a better result or a quicker result, or the negotiation process that might take weeks to make a decision about when and whether to have the surgery, the workers’ comp insurer is also paying weekly benefits that will continue until that person is recovered and gets back to work. So they may be saving money on a particular medical procedure, but in so doing if they are delaying the return to work and the successful treatment, the cost savings on the surgery may be offset in greater amount by the additional wage replacement that have been paid while this process plays out. How is that a consideration in assessing the cost of medical insurance in the workers’ comp setting?
Ramona Tanabe: Our study doesn’t address that question. However, you’re correct that the prompt provision of appropriate medical services is what everybody wants for injured workers, and extended times for the treatment mean higher payments for wage replacement benefits.
Alan Pierce: What would you say would be any surprise or unanticipated findings that you and your researchers have come up with in looking at this again 28, 29 years after the last time it was studied by WCRI?
Ramona Tanabe: I think it’s actually the variety of fee schedules that are out there, exactly how different they are across all of the jurisdictions. Those are completely appropriate, because it’s a determination by the policy makers within the state of what’s appropriate for the injured workers within their state, but exactly how widely the fee schedules help — the reimbursement rates are so different is always a surprise when we run the numbers.
Alan Pierce: Does WCRI or any of you folks get called into the discussions when fee schedules are being reviewed or analyzed in any particular jurisdiction?
Ramona Tanabe: We do. When a state perhaps wants to make a change in the basis of how their fee schedule is computed, that math behind how those numbers come up, sometimes, we’ll get asked to other states do this and do we have an example of that, or if a state wants to make a change, they might ask us if we’ve seen an example of how that change has happened in another jurisdiction, and then we can provide perhaps a lesson from what happened when a state made a similar type of change.
Alan Pierce: You mentioned a little bit ago that Massachusetts and Florida were on the low end of medical fee reimbursement rates. Can you generalize on either of these two jurisdictions if their medical costs are equally low or they nevertheless higher than one might expect for having a low fee schedule?
Ramona Tanabe: Not from this report, but we have other reports that do compare average medical cost per claim across jurisdictions. So we would look to those to see how similar or different those states are, because remember, this is just a price piece of it.
Alan Pierce: All right, if any members of our audience wanted to get some more information or a copy of your study or a synopsis, is anything available to our listeners?
Ramona Tanabe: Yes. They’re welcome to visit our website and they can look for the fee schedule benchmarks report. If they have any questions, they’re welcome to call me or they can call the institute and reach out to Andrew Kenneally, who’s our communications director, and he’d be happy to help them.
Alan Pierce: What’s your Website address?
Ramona Tanabe: It is www.wcrinet.org.
Alan Pierce: Anything you would like to add to our wrap-up with before we say goodbye, Ramona?
Ramona Tanabe: I think that looking at all the components of medical costs, medical fee schedules are an important part of looking at how those costs might be controlled or predicted, and it’s important to not ignore the access to care issue for injured workers.
Alan Pierce: All right. Well, thank you very much. I want to thank WCRI, of course, for always making its researchers, such as Ramona, available to us. We’ve done several shows on some of your studies and we’ll hope to continue to do so. To those of you that tune in and listen to our podcast, I hope you find this informative, and hope you come and listen to us again when we have our next additional of workers’ comp matters. So Ramona, thank you very much and to our audience. Goodbye until we talk to you again. Bye.